India?s largest power sector lender, Power Finance Corporation, is furiously writing out cheques for Rs 15,000 crore to beat the March 31 deadline.
By Wednesday, the company has to issue sanction letters for an additional loan of Rs 15,000 crore to state-level power projects. The urgency has come about after the Reserve Bank of India waived the cap, of 35% of net worth, on state-wise lending for power projects.
The cap is normally applicable to all non-banking financial companies to ensure their risks are not concentrated with one group.
The waiver is meant to spur investment in power, an acutely fund-starved infrastructure sector. But as the waiver has come almost at the last minute, PFC officials are rushing to clear up pending loans. Until November, PFC has sanctioned loans worth Rs 38,976 crore. The additional Rs 15,000 crore will raise its sanctions by 38%.
In July 2009, RBI had reviewed the PFC portfolio as it was nearing the ceiling for prudential norms in lending to state and central sector power projects.
According to RBI norms, banks and NBFCs have to restrict their lending up to 20% and 35% of their individual net worth for a company and a group, respectively. These norms are applicable to projects financed by state governments, too. For those states where PFC had reached the limit it had to freeze further lending. That freeze has now thawed.
It has taken several rounds of discussions between officials from the power ministry and RBI to sort this out. However, neither PFC chairman Satnam Singh nor other senior officials of the company was willing to comment on the development. The exemption will last until March 2012. It has come at a time when most banks have exhausted their exposure limit for lending to the power sector. RBI statistics show bank credit to the power sector stood at Rs 1,14,402 crore as of December 2009.
Meanwhile, Power Finance Corp has sold Rs 1,470 crore of 8.95% bonds, according to sources. The bonds were sold in 5-, 10- and 15-year strips by a group of 18 underwriters, they added.