The average cost of borrowing of Small Industries Development Bank of India (Sidbi) is expected to come down by about 50 basis points to 10 per cent. Its lendable resources will also go up during the next financial year.
This follows the Union Budget announcement allowing the financial institution to raise funds through tax-free capital gains bonds under Section 54 EC of the Income Tax Act coupled with the move to prepay high-cost debt.
Sidbi has paid back 65 per cent of Rs 750 crore, which it had raised in 1993 though 25-year deep discount bonds at an interest rate of 16.12 per cent. The amount is expected to be prepaid completely by the end of this fiscal. Since it has exercised the call option, no interest is accruing on the bonds since February 1, 2002.
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Further, it has also redeemed the 5-year bonds through which it has raised Rs 360 crore in 1997 via private placement. The contracted rate of interest for this issue, which was redeemed on March 1, 2002, was 15.5 per cent.
P B Nimbalkar, chairman and managing director, said: