REC cuts lending rates by 100 bps across the board

Our Corporate Bureau

Mumbai, Jan 7: The Rural Electrification Corporation Ltd (REC) on Monday effected an across-the-board 100 basis points cut in its lending rates. REC’s chairman Divakar Dev, said that with this cut of 100 bps, the maximum lending rate will now be at 14 per cent with the minimum at 10.5 per cent.

REC is the first specialised financial institution to slash its lending rate after a one per cent cut in the bank rate by the Reserve Bank of India (RBI) to 6.5 per cent.

The new lending rates, Mr Dev said will be applicable for all loans sanctioned by REC with effect from Monday. Disbursements of loans sanctioned earlier will also carry the revised interest rates.

REC, a state-run financial institution lends funds for the purpose of rural electrification. The company has also diversified into other related areas like the financing of decentralised power generation projects, new and renewable energy sources amongst others.

According to banking sources, REC has made this move as it had scope for a reduction in interest rates in the higher bands, which was at 15 per cent.

A top industry official said that other financial institutions are unlikely to reduce their lending rates as the business profile of FIs like ICICI and the Industrial Development Bank of India (IDBI) are different. REC lends to state electricty boards (SEBs) and co-operatives. Mr Dev said that the company has been able to reduce its cost of funds considerably by paying off its expensive borrowings. In the current fiscal, borrowings of around Rs 650 crore from the government have been retired while in the preceding one, it had retired around Rs 250 crore to the government.REC has sanctioned Rs 6,308 crore in the fiscal 2000-01 as against Rs 4,678 crore in the preceding fiscal. Disbursements for the fiscal 2000-01 stands at Rs 4,109 crore (Rs 3,051 crore).