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Loans for solar power projects set to get cheaper

The Hindu Business Line:  December, 2012

Chennai: The World Bank has agreed to make available a $200 million (Rs 1,100 crore) line-of-credit to IIFCL (India Infrastructure Finance Company Ltd) for lending to solar power projects in India. This will pave the way for cheaper loans for solar projects.

Confirming this to Business Line, the Chairman and Managing Director of IIFCL, S. K. Goel, said that after the World Bank’s acceptance of the proposal, “we are proceeding with the general terms and conditions.”

He expects the LoC to be operational by the end of this month. The LoC is available for all renewable energy projects but “our priority is solar,” Goel said. IIFCL is already a major lender to solar projects with exposure of Rs 570 crore. It is learnt that the government-owned non-banking finance company has co-lent to 210 MW of solar projects.

IIFCL will pass on the benefits of the lower interest rates even to its existing borrowers, Goel said. He said that borrowers could get foreign currency loans at less than 4 per cent, as IIFCL will lend at ‘Libor plus 300 basis points’. (Libor is the rate at which a top-rated bank will lend to another top-rated bank in Europe.)

While a part of the $200 m LoC will be used for replacing existing rupee loans of IIFCL’s solar borrowers, the rest of the funds will be for lending to other projects.

Goel said that if the demand exceeds $200 m, IIFCL would approach the World Bank for further funds. “The World Bank, IIFCL and the Government of India all want to encourage solar. I don’t see why this cannot happen,” he said.