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IIFCL refinance to reduce infra cost

Cash-strapped infrastructure companies could look forward lower cost of borrowing by about two percentage points in the coming months after the government opened the additional refinance window of Rs 30,000 crore administered through the IIFCL. Samiran Saha reports.

business Updated: Feb 18, 2009 23:10 IST
Samiran Saha

Cash-strapped infrastructure companies could look forward lower cost of borrowing by about two percentage points in the coming months after the government opened the additional refinance window of Rs 30,000 crore administered through the India Infrastructure Finance Company Ltd. (IIFCL).

The rising hesitation of banks to lend to infrastructure projects have rung alarm bells in the government as several critical current and planned projects could get delayed by several months for want of funds. “Even if a couple of banks block disbursement, the entire disbursement schedule gets seriously disturbed,” a senior government official said, requesting anonymity.

Data show that banks charge above 13 per cent interest rates. This year alone, interest rates for infrastructure projects have gone up by at least 3 percentage points. Developers, who have been hemmed by rising borrowing cost and poor credit availability, expected the refinance window would reduce cost of finances.

“The new refinance scheme will provide some relief. We expect the banks to borrow at around 8 per cent from IIFCL and lend to rates much lower than the existing rates of above 13 per cent,” A Subbarao president and chief finance officer of the GMR group told Hindustan Times.