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Renewable energy projects could get easily financed and that too at low interest rates

(14 Jun 2016)

Due to the lack of projects in thermal and hydropower sectors, the financiers have found a new favourite in the 'Renewable Energy' sector, projetcs belonging to which will now find it easier to get loans easily and that too at low interest rates. 

Rural Electrification Corp (REC) and Power Finance Corp (PFC), both of which are financiers from the power sector, are offering attractive loans to renewable energy projects . REC has even reduced its rate of interest to renewable projects by 50 basis points (bps), bringing them down to 11.5%. In comparison, the interest rates on loans to conventional and hydropower projects stand at 11.75% to 13.40%. 

Similar projects in 2010-11 attracted around 13.5% rate of interest. 

"The reduction of interest rates is a combination of two factors. Our borrowing costs have slightly come down in the last three-four months and we want to be more competitive in renewable energy lending," a senior REC executive told ET. 

Not only this, the company is also considering to raise the sole funding limit to 50 MW for wind and solar power plants to Rs 250 crore per project. At present, the limit stands at Rs 200 crore. 

While in 2010-11, REC had sanctioned Rs 390 crore for renewable energy projects, last year, the figure was Rs 2,965 crore. PFC, on the other hand, sanctioned close to Rs 1,900 crore to renewable energy projects last year.

Also, the repayment period of these loans has been increased to 15 years from the earlier 10 years, while the moratorium period is now one year from the earlier period of six months. Not to forget, loans on these projects no longer require any collateral security. 

The reason behind these newfound love for green energy space is that the government has announced a target to set up 175 GW of renewable projects by 2022 , which has caught the attention of several companies. 

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