Power Finance Corporation (PFC) may now take an additional lending exposure of up to five per cent of its funds in case of a single borrower or a group of borrowers in the private sector. The Reserve Bank of India (RBI) has granted the government-controlled power financier the status of an infrastructure finance company (IFC). It was earlier classified as a loan company.
The status will also help PFC seek government permission for issuance of infrastructure bonds. Exposure of banks, one of the major providers of funds to PFC, can now be 20 per cent of its capital funds (instead of 15 per cent earlier), including the additional five per cent exposure allowed for lending to the infrastructure sector, the company said in a statement. Further, as an infrastructure finance company, the risk weight of banks' finance to PFC shall now be 20 per cent vis-à-vis extant risk weight of 100 per cent earlier. Lower risk weight will help PFC in securing competitive interest rates from banks.
RBI earlier classified Non-Banking Financial Companies (NBFCs) under three categories: asset finance companies, loan companies and investment companies. It recently introduced a fourth category, of an IFC. It has extended some benefits in lending/borrowing exposure, risk weight and raising ECB (external commercial borrowing) to an NBFC classified as an IFC. An NBFC-IFC may also apply for issuance of infrastructure bonds.
PFC, a non-deposit accepting/holding NBFC, had requested RBI for this status. It took effect from yesterday.
