The Power Ministry said on Wednesday that State-run PFC and REC have reduced their lending rates across all types of loans by 40 basis points (bps), a move that will help power utilities raise loans at cheaper rates. The power sector non-banking financial companies (NBFC) have already been offering short term loans at 6.25 per cent interest rate.

“In order to give a boost to renewable energy, where long term funding is required, rates have been revised to as low as 8.25 per cent. The reduction in rates has been possible due to lower cost of borrowings by these organisations in the past year or so,” the Power Ministry said in a statement.

Reducing rates

Power Minister R K Singh commended the continued efforts by both the NBFCs — PFC and REC — to reduce rates and remain competitive. He emphasised that continued reduction of lending rates by REC and PFC will help power utilities borrow at competitive rates and invest in improving power sector infrastructure, thereby benefitting the consumer by way of reliable and cheap power.

In October last year, Singh directed PFC and REC to explore cheaper avenues for raising funds, including through offshore sources, besides focusing on ensuring that the power sector value chain gets access to cheaper funds, especially the renewable energy segment.

In the last year, both companies have reduced lending rates cumulatively by up to 3 per cent. They had cut their lending rates by up to two percentage points, with effect from April 1, 2021.

In April-November FY22, PFC sanctioned loans worth around ₹14,940 crore and disbursed ₹8,313 crore. In FY21, the Maha Ratna company had sanctioned ₹33,840 crore of loans out of which it had disbursed ₹20,031 crore.

REC, on the other hand, sanctioned loans worth around ₹12,627 crore and disbursed ₹11,585 crore during April-November FY22. In FY21, it had sanctioned loans of ₹42,844 crore and disbursed ₹19,917 crore.

Nodal agencies

At present, the government holds 55.99 per cent stake in PFC, while PFC in turn holds a 52.63 per cent stake in REC. They act as nodal agencies for flagship schemes such as Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya) and Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY). They have also been nominated as nodal agencies for the recently launched revamped distribution sector scheme (RDSS).

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