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Indian Railway Finance Corporation Ltd (IRFC), the specialized financing arm of Indian Railways, is planning to refinance around ₹10,000 crore of high-cost foreign loans by the second quarter of FY25. The move is expected to lower interest costs by 100 to 150 basis points (1 to 1.5 percent) by taking advantage of domestic and international markets to minimize funding costs for railway infrastructure projects in progress.
Key Highlights: Refinancing Strategy and Impact
The refinancing program aims at costly loans obtained from multilateral and international organizations, such as banks and non-banking financial institutions (NBFCs), several of which have turned more expensive because of rupee depreciation against the dollar.
IRFC Chairman and CEO Manoj Kumar Dubey pointed out that refinancing will cover all the high-cost loans, including those from bilateral foreign lenders, to replace them with lower-cost borrowings.
The step will enhance IRFC's net interest margins by lending at more competitive rates than what NBFCs and banks are offering now, thus rendering railway infrastructure financing more affordable and sustainable.
Out of the approved ₹25,000 crore for refinancing and fresh lending, a large part is marked for refinancing of high-cost debt to free Indian Railways and its special purpose vehicles (SPVs) from the burden.
Metro Financing Drive and Emerging Models
IRFC is also working on a novel financing model for metro rail projects, to provide low-cost and flexible loans based on international best practices in project appraisal.
These metro loans will need specific guarantees from central and state governments for credit quality and risk mitigation.
IRFC will expand its scope beyond conventional railway projects to multimodal logistics parks and other rail ecosystem projects in expectation of better returns and increased business opportunities.
Broader Implications The refinancing will also shield infrastructure projects from the prohibitive expense and stringent terms usually linked to foreign loans, improving the feasibility and financial sustainability of important national and urban transport projects.
IRFC’s efforts align with government priorities to promote infrastructure development while mitigating currency risk and interest burden amid volatile global financial markets.
Sustained emphasis on zero non-performing assets reflects IRFC's dedication to sound financial management.
This refinancing plan and metro financing growth place IRFC at the center of catalyzing affordable and long-term financing of India's rail and urban mass transit infrastructure.
Sources: Economic Times, The Hindu Business Line
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