State NBFCs – PFC & REC Reduce Lending Rates by up to 2 Percentage Points

State NBFCs – PFC & REC Reduce Lending Rates by up to 2 Percentage Points Budget reactions

State-owned non-banking financial corporations Power Finance Corporation (PFC) and REC will reduce lending rates by up to two percentage points from April 1, 2021.

“PFC and REC as group companies have been aligning operations to realise synergies. As part of such effort, PFC and REC have now decided together to reduce lending rates up to two percentage points,” PFC said in a statement.

The new lending rates will be effective from April 1, 2021. This initiative was undertaken to offer competitive rates, in line with the rates being offered by peers in the market, it said. This will also help PFC and REC continue their business growth going forward in addition to maintaining reasonable spreads, it added.

The reduction in lending rates will help both PFC and REC offer lower rates to power utilities, which will reduce their borrowing costs, thereby reducing their interest payments and benefitting the end consumers in terms of lower tariff, it said.

PFC and REC, under the power ministry, are the prime financiers in the Indian power sector having a significant market share.

Recently, Union Minister for Power and New & Renewable Energy RK Singh had said that so far, loans of Rs 1.35,497 crore (Rs 1.35 lakh crore) have been sanctioned and that of that, loan amount worth Rs 46,321 crore has been released to states/ Discoms by REC and PFC under the Liquidity Infusion Scheme for the stressed Discoms of the country as part of AatmaNirbhar Bharat Abhiyan announced by the Finance Ministry in May 2020.

The Government of India had announced a Liquidity Infusion Scheme on May 13, 2020, in the backdrop of the outbreak of the COVID-19 pandemic in the country.

Under the scheme, Power Finance Corporation (PFC) and REC had been assigned by the government to extend special long-term transition loans at concessional rates to Discoms against the receivables of the Discoms from the state government in the form of electricity dues and subsidy not disbursed, to enable them to clear their outstanding dues as existed on June 30, 2020, towards Central Public Sector Undertaking (CPSU) Generation (Genco) & Transmission Companies (Transcos), Independent Power Producers (IPPs) and Renewable Energy (RE) generators.

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