PMC’s Cosmos Bank loan plan for HCMTR project draws flak

Ram said the proposed arrangement would allow the civic body to earn over 7% interest on its deposit while borrowing at an estimated 7.5% to 7.7%

With banks reluctant to finance land acquisition and those willing to lend quoting higher interest rates, Pune Municipal Corporation (PMC) is considering borrowing ₹450 crore from Cosmos Cooperative Bank against a ₹500-crore fixed deposit with the same bank to fund land acquisition for its high capacity mass transit route (HCMTR) project, said municipal commissioner Naval Kishore Ram on Wednesday.

The standing committee has approved the proposal, but the process is yet to be completed. (HT)

Ram said the proposed arrangement would allow the civic body to earn over 7% interest on its deposit while borrowing at an estimated 7.5% to 7.7%. However, the loan interest rate is yet to be finalised.

“Banks do not easily provide loans for land acquisition. Very few banks offer such loans, and that too at high interest rates. PMC is not helping the bank; Cosmos Bank is helping us,” he said.

Standing committee chairman Shrinath Bhimale said the civic body was considering the arrangement because Cosmos Bank was offering funds at a comparatively lower interest rate.

“We will need around ₹1,000 crore for the HCMTR project. The proposal is to deposit money with Cosmos Bank and raise funds from it at a lower interest rate. We will discuss the matter with the municipal commissioner before taking a final decision,” Bhimale said.

The standing committee has approved the proposal, but the process is yet to be completed. A final decision will be taken after further discussions with the commissioner. Bhimale said objections raised by elected members would also be considered.

Ram said the arrangement would safeguard the civic body’s deposit while enabling it to raise funds for land acquisition. He maintained that the fixed deposit would remain secure even if the bank encountered financial difficulties.

Congress corporator Arvind Shinde objected to selecting a cooperative bank without inviting expressions of interest (EOI). He said PMC should invite competitive offers from banks and select the lender offering the lowest interest rate.

Shinde cited the availability of World Bank loans at around 0.1% interest and questioned the need for fresh borrowing when the civic body has fixed deposits worth approximately ₹8,500 crore.