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FCI has been borrowing an average of Rs.25000 crore from a consortium of
Banks consisting of 65 Member Banks under the leadership of State Bank
of India. The interest charged on Consortium borrowing is based on as
average of prime lending rates of 5 major banks in the Consortium.
While the interest rate charged by the Consortium was hovering at 10.95%
in December,2003, the FCI in its recent efforts to bring down the
interest cost,has been able to make a significant head way by suitably
highlighting the issue and convincing the Government of India, RBI and
SBI led Consortium to obtain interest reduction.
Accordingly, the SBI led Consortium gradually reduced the rate of interest to 9.35% from 1st January,2004 and 9.10% from April,2004. The SBI led Consortium further agreed to reduce the rate of interest to 8.15% from 11th August,2004. This reduction of interest would yield a saving of Rs 700 crore per year. In addtion, the Food Corporation of India has also mobilized a whopping Rs 8605 crore during the year 2005 through private placement issue of FCI bonds. The Corporation is also planning to tap the market for it's another issue of Rs 1400 crore before the end of the current financial year. The borrowing by way of issue of bonds would result into saving of Rs.170 crore per annum. The Corporation started borrowing through Bonds in February,2005 and its first tranche of the Bonds could raise over Rs 9000 crore in a record time of just less than one day against the target size of Rs.500 crore to be raised in 10 days. The first tranche was opened on 21st February,2005 and it was fully subscribed within an hour |
The Food Corporation of India has also mobilised a whopping Rs.8605 crore during the year 2005 through private placement and issue of FCI bonds. |
and
over subscribed by more than 18 times before the issue was closed at
2.30p.m. on the very next day itself. The FCI Bonds have been well
received by all the segments of institutional investors particularly
banks. Financial Institutions, Insurance Companies, Mutual Funds,
Provident Funds etc.
The FCI has been relying on a single source of financing since inception from 1965 and the Bond issue is a land mark achievement in seeking cheaper source of finance. This is the first step towards debt restructuring plan of the FCI. Funds being the life blood of an organization, an appropriate mix of the borrowing by way of Bonds, terms loans and Consortium financing for meeting the total funds requirement of the FCI would be resorted to keeping in view the seasonal variations in cash flow and core funding requirements of the FCI. Towards further reducing the borrowing cost on Bond issue, the FCI has recently executed its Pilot interest Rate Swap (IRS) transaction. Based on success of the pilot IRS transaction, the Corporation would be positively geared to undertake increasing volumes in times to come. In addition to above, various other measures have been taken by the FCI towards strengthening and improving financial management by way of realizing long pending arrear claims of subsidy resulting into saving to tune of Rs 900 crore and by way of various other miscellaneous measures such as claiming quarterly advance subsidy, availing of cash management services, re-financing of HBA, availing of guarantee limits and merger of Zonal cash credit accounts bringing in saving of Rs.200 crore. |
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