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HomeNewsNBCC to Setup Shadow Lender to help Save Over 100 Mn

NBCC to Setup Shadow Lender to help Save Over 100 Mn

Reuters

India’s state-run NBCC plans to set up its own non-banking finance Company (NBFC) later this year to lower its borrowing costs for key infrastructure projects, according to two sources directly involved in the matter.

The construction and real estate developer estimates the move will help it save $108 million in interest costs over the next two years, said the sources, who did not want to be named as the discussion are private.

NBCC’s share rose as much as 1.8% set to break a five-session losing streak, after the Reuters report. They were last up about 1% at 125.95 rupees at 0834 GMT.

The Indian Government owns infrastructure financial institutions but no other state-run company has created a unit to help it finance projects.

The NBCC’s board discussed the proposal to set up a shadow lender in March, the sources said.  The final structure of the NBCC will be decided after June, the second source said.

NBCC will seek approval for the shadow bank from the new administrator that will be elected in June, at the end of the seven-phase national polls that started on Friday.

The company will also need a license from the Reserve Bank of India (RBI), which it has not applied for.

NBCC did not reply to emails seeking comments.

Currently, NBCC pays 12% to 14% to other NBFCs in borrowing costs and that could be lowered by 1-2 percentage points if it sets up the NBFC, the first source said.

“The in-house NBFC will help in getting seed money for redevelopment and monetization projects of other public sector entities,” said the first source.

NBCC recently got redevelopment projects from Steel Authority of India Ltd and Indian Railways. The state-run firm has floated setting up an NBFC in 2016 as well, but had failed.

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