NHAI signs pact with SBI for largest unsecured loan at lowest interest

The Rs 250 bn long-term loan is also the largest sanctioned by SBI at one stroke to any entity

National Highways Authority of India (NHAI) has signed an agreement with State Bank of India for raising an unsecured loan of Rs 250 billion for 10 years with a three-year moratorium on repayment. This is the largest loan amount to have been sanctioned to NHAI in one stroke by any institution and at the lowest rate of 7.9 per cent. 

This is also the largest long-term unsecured loan sanctioned by SBI at a time to any entity, an official statement said.

NHAI had invited an Expression of Interest from Scheduled Commercial Banks for this loan, in response to which, SBI offered to fund the entire requirement based on one-month Marginal Cost of funds based Lending rate (MCLR) of 7.9 per cent.

“The interest rate offered by SBI is even lower than LIC’s 8.51 per cent,” an NHAI official said.

The loan from SBI is unsecured, with any collateral. There is no principal repayment liability for the first three years, after which the repayment would be made in 14 equal half-yearly instalments. The total loan tenure is 10 years. NHAI can prepay at any time without any prepayment penalty, the statement said.

The total sanctioned amount of Rs 250 billion will be disbursed before March 31, 2019. The rate of interest would be based on one-month MCLR. Interest accrued on the amount actually outstanding will be paid on monthly basis. NHAI can draw the amount in any number of tranches, latest by March 31, 2019.

NHAI has traditionally relied on borrowing through long-term bonds issued to various investors, including LIC, Employees' Provident Fund Organisation (EPFO) and other qualified investors, and tax-free bonds and Masala Bond issued in the year 2017.