HIDCL launches long-term wholesale loan for banks

The Hydroelectricity Investment and Development Company Limited (HIDCL) has introduced long-term wholesale loan and refinancing for commercial banks looking for investment in hydropower projects.

Launching the Onlending/Refinancing Policy on Friday, HIDCL said the new initiative is aimed at facilitating commercial banks to invest in hydropower projects with 10-15MW capacities.

As per the policy, a single bank can get loan facility of up to Rs 400 million for a single project and Rs 1 billion for more than one projects. The commercial banks can receive the refinancing facility for a period of 3-5 years. “This is a long-term loan for banks since they do not get timely returns on such kinds of investments,” said HIDCL CEO Deepak Rauniyar.

“The hydropower sector requires long-term investments. Since commercial banks have short-term deposits and HIDCL is not mandated to promote hydropower projects with 10-15MW capacities, we will be facilitating banks with the wholesale loan,” he said.

Based on the demand, the loan can be extended for a period of two years after the completion of the period. HIDCL has stated the banks will be solely responsible for the evaluation of the risk.

They will have to maintain their spread rate at 3 percent on the loan they take from HIDCL.

“Three percent of spread rate is a very good incentive for banks,” said Rauniyar.

The banks will also have to meet criteria set by HIDCL in order to avail the facility. “These criteria are largely based on the criteria set by the central bank to identify the health of a bank,” said Rauniyar.

Some of the criteria are the banks have to maintain Non Performing Assets (NPA) at less than 5 percent, maintain 60:40 ratio of institutional and public deposits, capital fund should not be less than 10 percent, CD ratio should not exceed 80 percent, and the balance sheet should show net profit for at least three previous years. Also, banks should not have faced the central bank’s action.

HIDCL is a government entity established to generate resources and invest on hydropower development. The company is mandated to work along with consortium partners in projects with 15-25MW capacities and take lead in projects of more than 25MW capacity.

So far, it has signed agreements with four hydropower projects to provide them consortium loans with a total outlay of over Rs 2 billion with other banks and financial institutions. Among the projects are 42MW Mristi Khola, 30MW Khani Khola, 27MW Dordi Khola and 23.5MW Solu Khola.

Source : The Kathmandu Post