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August 25, 2001
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Money > Business Headlines > Report August 25, 2001 |
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DPC's domestic lenders ready to cut interest ratesBS Banking Bureau In a last-ditch attempt to save the controversial $3-billion Dabhol power project in Maharashtra, Indian lenders led by the Industrial Development Bank of India are readying for a drastic cut in interest rates. They may also buy out the loans of foreign lenders which account for about one-third of the total loan book. The domestic lenders met in Bombay on Friday to take stock of the situation while the foreign lenders' meeting is on at Amsterdam. The Centre's refusal to take into consideration the foreign lenders while preparing the DPC package has widened the rift between the two sets of lenders. "The foreign lenders will be too happy if the domestic lenders actually buyout their loans. But once they step out, the government may lose interest in saving the project and the domestic lenders may end up raising their exposure to the controversial project substantially," said a source. According to sources among the lenders, IDBI, ICICI as well as State Bank of India are considering at least two percentage points cut in interest rates to bring down the interest cost for the promoters. "The DPC exposure carries a floating rate interest. Banks and FIs may drastically cut the spread over their prime lending rate," said a source. The Indian lenders want the power tariff to be brought down to Rs 3. They are also toying with the idea of buying out the foreign lenders' loans and converting foreign currency loans into rupee loan. This is being done to isolate the DPC exposure from currency fluctuations. To bring down the costs, the Godbole committee has recommended conversion of the foreign currency loans into rupee loans. Following the government's external commercial borrowing guidelines, 25 per cent of the forex loan can be converted into rupee loan every year taking the pre-payment route. The Indian lenders are also not averse to the idea of raising the moratorium on loan repayment by at least one more year. The moratorium is currently pegged at one year. Besides, they are also willing to consider to stretch the repayment schedule from the existing level of nine years to about 12 years. Both IDBI and SBI had earlier cut the interest rates. While IDBI slashed it from around 19 per cent to 16.5 per cent, SBI cut it from around 17 per cent to 15 per cent. The average interest cost for rupee loan for phase I is pegged at 16.5 per cent and phase II 16.11 per cent. Three Indian lenders to Dabhol Power Company -- IDBI, ICICI and SBI -- have a guarantee exposure to the tune of Rs 30 billion, besides funded exposure of around Rs 22.55 billion. Powered by YOU MAY ALSO WANT TO READ:
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