REC, PFC mulling entry into banking biz, says REC chief

State-owned power finance companies -- Rural Electrification Corporation and Power Finance Corporation -- are contemplating a foray into banking in order to get access to cheaper funds, a senior official said today.

"We are brainstorming (on the idea of getting into banking) currently. The heads of power finance PSUs will be meeting tomorrow to discuss the same," Rural Electrification Corporation's Chairman and Managing Director Jairaj Phatak told reporters here today.

REC has also set up an internal committee to deliberate on the issue, he said.

"Through a presence in banking, we can get access to cheap savings, bank funds which can be used for financing," Phatak said, adding depending on the decision, either an SPV (special purpose vehicle) or a subsidiary will be launched.

At present, participants in the deliberations are limited to power finance companies and generating companies like NTPC are not on board, Phatak said.

The RBI had earlier this month issued a discussion paper on granting new banking licences.

REC will be raising $400 million in foreign borrowings by September and will be signing agreements with the lead managers next week, Phatak said.

State Bank of India and Bank of Tokyo Mitsubishi have agreed for $200 million and a similar amount has been assured by two Chinese banks' Singapore units, he said.

REC was recently given permission by RBI to raise $200 million with a greenshoe option through which it can raise an equal amount, he said.