New SBI lending rate likely to raise Hyderabad metro rail cost

With the State Bank of India's move of hiking lending rates by 75 basis points, the cost of the Rs 16,375 crore Hyderabad Metro Rail project, is likely to scale up further. The new lending rate for the metro rail project will be 11.25%.

The country’s largest bank, SBI, yesterday hiked its lending rates by 75 basis points to 9.25%.

A consortium of 10 banks, led by SBI, had come forward to make available Rs 11,480 crore for this project. The L&T Metro Rail (Hyderabad) Limited, a subsidiary and a special purpose vehicle of the L&T Infrastructure Development Projects, provided Rs 3,440 crore as its capital. Besides this, the SBI was to lend Rs 3,000 crore for the project.

The cost of the metro rail project estimated in 2008 to be Rs 12,132 crore, had already shot up to over Rs 16,000 crore over the past three years due to inflation and steep increase in steel and cement prices.

However, L&T Metro Rail Ltd, which was set to start the work on the project, feels that the hike in lending rates will not last long.

VB Gadgil, Chief Executive and Managing Director of L&T Metro Rail said that the lending rate hike is likely to be a temporary anti-inflationary measure taken by the Reserve Bank of India and said that he was yet to gauge its impact.

The hike in interest rate hike is a matter of worry for us. However, we are not unduly worried, because it might come down tomorrow. We have to implement the project on time. Hiking the interest rate is an anti-inflationary measure. They may reduce it if inflation comes under control,” Gadgil told PTI.

Asked about the insurance part of the metro rail project, Gadgil said they were yet to get a response from insurance companies in this regard.