System flush with funds, Food Corporation of India borrows at under 4.6%

The lowest bid has come from HDFC Bank, which will provide around Rs 7,500 crore loans, followed by 4.75% from PNB, which is ready to release Rs 14,000 crore, three persons familiar with the details told TOI.

ThinkStock Photos
The highest quote on offer is 5.5%, which is more than a percentage point lower than SBI’s MCLR for three months of 6.65%.
NEW DELHI: Abundant cash in the system and repeated rate cuts have proved to be a bonanza for Food Corporation of India (FCI), which is in the market to raise Rs 75,000 crore. The government agency has received a bid to borrow a part of the 90-day loan for as low as 4.59%, compared to the three-month Marginal Cost of Lending Rate (MCLR) of 6.65-7.1% for public sector and private banks, sources told TOI. Most individuals will have to pay higher than MCLR to avail of a loan.

Against its tender to raise Rs 75,000 crore, it has received bids for Rs 85,000 crore from multiple banks. Given exposure limits, several banks will get a share of the pie as FCI seeks to meet its temporary fund requirement in the absence of the government releasing subsidy, given the tight fiscal situation. The lowest bid has come from HDFC Bank, which will provide around Rs 7,500 crore loans, followed by 4.75% from PNB, which is ready to release Rs 14,000 crore, three persons familiar with the details told TOI. The highest quote on offer is 5.5%, which is more than a percentage point lower than SBI’s MCLR for three months of 6.65%, PNB’s 6.95% and HDFC Bank’s 7.1%.

“There is so much liquidity in the system and there is so little demand that we do not know what to do with the cash,” said a banker. Instead of lending at sub-5% to FCI, which is as good as sovereign, banks will have no option but to park funds through the overnight reverse repo window and earn 3.35%. “As long as it is referenced to some benchmark, we can lend it below MCLR,” explained another banker.

Download
The Economic Times Business News App
for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App
for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
READ MORE
ADVERTISEMENT

READ MORE:

LOGIN & CLAIM

50 TIMESPOINTS

Related Companies

More from our Partners

Loading next story
Text Size:AAA
Success
This article has been saved

*

+