Even as state-owned India Infrastructure Finance Company is ready to launch its new takeout finance scheme on Tuesday, banks have refused to accept IIFCL?s lower interest rates.
According to the scheme, IIFCL would buy out 50% of commercial banks? core sector exposure. While the IIFCL is prepared to offer much cheaper rates for the portion of assets it has taken over, banks which had originated these loans are not prepared to do so.
A senior official of IIFCL has confirmed rates will come down once the project risk comes down. However, a public sector bank chief said there was lack of clarity on the interest rate to be charged by banks after they avail themselves of takeout financing.
?IIFCL may bring down the interest rate on the loan it has taken over in case the implementation risk comes down, but as bankers, we have no such commitment. We have to face a scenario where the borrowers may hesitate to pay differential rate of interest to be charged for the same account of loan.?
Nagesh Pydah, executive director, Punjab National Bank said, ?In case of recourse, the interest rate may go up and it may come down in case of non-recourse funding. Also, there may be difference in interest rate pre and post implementation of the project. While the interest rate may be higher until implementation, it may come down post implementation with lower implementation risk. But, the scheme will not help NPA management of the bank.?
Normally, infra projects have longer duration up to 15 years. So, the scheme will take care of PNB?s asset liability match for the balance five years. In PNB?s case, infra projects comprise Rs 18,000 crore and form 8.5% of the loanbook. Arun Kaul, CMD, Uco Bank, said infra projects have long repayment period and therefore the scheme will help the bank offload some assets to IIFCL.
IIFCL chairman SK Goel said in the first three years, the company would buy out Rs 25,000 crore of loans from commercial banks.