NBFCs to pay 14.5% on spl window fund

Non-banking finance companies (NBFCs) may be able to start raising resources against commercial paper and non-convertible debentures from this week on but the funds are not going to come cheap.

Sources involved with the special lending facility for NBFCs said the cost of funds would add up to at least 14.5 per cent. While the Reserve Bank of India (RBI) will charge 9.5 per cent, which is 400 basis points over the prevailing repo rate, another 1.5 per cent will be added due to the government guarantee fee. In addition, IDBI Bank’s Stressed Asset Stabilisation Fund (SASF), which has been mandated to implement the scheme, will charge at least 350 basis points to cover its administrative and management cost.

The 150-odd non-deposit taking systemically important NBFCs, eligible to use the window, can borrow up to Rs 2,000 crore, while the group limit has been fixed at Rs 3,000 crore.

Srei Infrastructure Finance and Shriram Transport have initiated talks to use the facility, but indicated they may not use the window if the cost is high.

“If the rates are in the region of 14-15 per cent, it will not be beneficial at all. We need around Rs 2,000-3,000 crore but we will access the window only if the interest rates are lower,” said Srei Infrastructure Finance Vice-chairman and Managing Director Hemant Kanoria.

While maintaining that the company does not intend to tap the window immediately, Shriram Transport Finance Managing Director R Sridhar said, “Since the funds are for the short term, NBFCs would be willing to access it even if the interest rates are on the higher side, as some of them need money immediately to correct their asset-liability mismatch.”

While the scheme has been finalised, a guarantee from the government is holding back its operationalisation, sources added. According to the scheme worked out by the government and RBI, SASF will purchase commercial paper and non-convertible debentures only from the issuing NBFC. The funds made available are to be used only for meeting asset-liability mismatch and not to fund business growth. SASF will raise resources by issuing government-guaranteed securities to RBI and use the funds to acquire investment-grade CPs and NCDs from the eligible NBFCs.