Pcfc To Face Competition From New Rbi Scheme

"The rates at which banks would provide foreign currency denominated loans to the customers would be Libor plus 2 per cent'' said a banker. This would be lower than the rates at which exporters avail of the PCFC credit. We would put the rates slightly lower than that at which the PCFC is pegged, which will see a considerable movement towards foreign currency denominated loans backed by FCNR (B) funds'' said another banker.

At present, PCFC credit is availed of at Libor plus 2.5 per cent. This is a dollar loan scheme under which banks lend to corporates at Libor related rates of interest. While there is a cap of 2.5 per cent, which RBI has put on interest charged, banks which do not have branches abroad, can charge up to 3 per cent also.

 

This will make borrowings under the PCFC scheme costlier than those under the FCNR (B) scheme. Bankers opine that most of the demand should shift from the PCFC scheme towards the new FCNR (B) scheme Secondly, a number of banks are of the opinion that there would be a movement away from borrowing rupee loans by corporates towards borrowing under the new FCNR (B) backed loans. A banker said this would be true if a large number of corporates are willing to keep their positions open. The RBI has instructed banks to be extremely vigilant in sanctioning and monitoring these loans.

Bankers said they are already getting a number of enquiries from corporates for borrowing under this scheme. It is expected that a number of corporates would move towards this scheme as the cost of funds under this would be lower than the prime lending rates offered by banks.