REC to Increase Loan Disbursements to Renewable Energy Segment in the Coming Years

As of March 31, 2018, REC has extended only 1 percent of its total loan disbursements towards renewable energy segment


The Rural Electrification Corporation (REC), a public sector unit of the government of India involved in financing all segments of the power sector, plans to increase loan disbursements for the renewable energy sector to 4-5 percent by 2022, according to PTI.

In the last financial year, the renewable energy segment received ₹34.18 billion (~$0.51 billion) from the REC, which amounts to only one percent of its total outstanding loan amount of ₹2,390 billion (~$ 35.41 billion) that is available for the sector.

Forty-five percent of loans are allocated for power generation, 33 percent for distribution, 19 percent for transmission, and nearly 2 percent will be applied towards short-term loans.

“Since financial year 2015, the share of renewable energy in the total loan book has been one per cent. However, considering the amount of work undertaken in the renewable energy segment, we believe the contribution towards this sector will increase to nearly 4-5 per cent of our total loan book by 2022,” PV Ramesh, the chairman and managing director of REC told PTI.

The government’s target of 175 GW of renewable energy by 2022, along with new programs for household electrification, railway electrification, and electric vehicles have generated a lot of demand for funding. The REC will target these sectors for the disbursement of the fund, most of which will go to private players.

In financial year 2018, the government-owned company approved ₹1,075.34 billion (~$15.93 billion) and disbursed ₹617.12 billion (~$9.14 billion), an increase of 28 percent from the previous year.

In the current financial year (FY), the REC is also planning to borrow ₹ 550 billion (~$8.15 billion). It intends to fund 60-65 percent of it through the commercial bond market and the remaining from foreign currency borrowing.

The company’s net non-performing assets in FY 2018 was ₹136.12 billion (~$2.02 billion) against the provision of ₹35.16 billion (~$0.52 billion). PV Ramesh told PTI that most of the additional NPAs are due to the new RBI guidelines issued for the resolution of stressed assets.

In August 2017, the REC provided a ₹130 billion (~$2 billion) loan to Maharashtra State Power Generation Co. (MAHAGENCO) for generation projects, flue gas desulfurization systems, working capital, and special loan requirements.

In the past year, the REC had raised $450 million through the sale of green bonds on the London Stock Exchange. The funds are to be utilized to develop solar, wind, and biomass projects, as well as sustainable water and waste management projects.

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