The Indian Railways Finance Corporation (IRFC) is seeking an extended repayment schedule with a two-year moratorium for its proposed Rs 200 crore loan from the State Bank of India.
If approved, this may be the first case in years when a commercial bank accepting the request for a moratorium on repayment.
Banks are not very keen to take long-term exposures in spite of encouragement from the Reserve Bank.
IRFC had held initial negotiations with SBI for the loan. It now wants the repayment period to be spread over 12 years a two year moratorium.
IRFC has also sought a four-year moratorium from the Life Insurance Corporation on a Rs 150 crore 15-year loan. LIC had given a four-year moratorium for a long-term loan to the PowerGrid Corporation.
Such long term debt is not easily available in the bond market, particularly when you are seeking a moratorium.
The bond markets are not deep enough. We need the moratorium to lessen the burden on debt servicing in the next few years, IRFC executive director (finance) Balachandran told Business Standard.
The organisation has already drawn a Rs 100 crore loan from the Corporation Bank on an interest rate of 14 per cent. But there is no moratorium structured in the repayment schedule.
The actual outgo in terms of interest and repayment of principal will work out to about Rs 3 or Rs 3.5 crore every six months on a Rs 100 crore loan after you factor in the moratorium. I think we can easily afford it, Balachandran said.
As the organisation is seeking a total of Rs 500 crore by way of loans from banks, the total outgo in a year would be Rs 30 crore. This is the first time that IRFC seeking loans from commercial banks. IRFC has also sought a Rs 50 crore loan from the Indian Oversees Bank.
In all these cases, the organisation is seeking loans at prime lending rates of the respective banks.
The interest is being structured to ensure that the cost of funds to the railways does not exceed 14.9 per cent. IRFC buys wagons with borrowed funds and lease them out to the railways. The lease rental at present is 17.5 per cent.
