In a significant move, the Power Finance Corporation (PFC) loan has successfully secured a foreign currency term loan of $1.27 billion. This represents the largest loan of its kind obtained by a public sector undertaking in India. The funds will primarily be directed towards PFC’s green energy financing efforts.
This substantial financing was arranged through a collaborative agreement with several banks based in the International Financial Services Centre (IFSC) in GIFT City, Gandhinagar. PFC highlighted that the loan will facilitate the expansion of its operations, boost its market presence, diversify funding avenues, and help maintain its competitive edge in the industry.
The loan carries a floating interest rate, currently averaging 4.21% per annum, and is denominated in major global currencies—USD, EUR, and JPY. It has a five-year term and is linked to external benchmarks, including SOFR, EURIBOR, and TONA. Key players in this transaction include SBI (State Bank of India), IDBI, Axis Bank, MUFG, Deutsche Bank, and SMBC, with SBI being the largest lender and acting as the facility agent.
The Secured Overnight Financing Rate (SOFR) reflects the cost of borrowing overnight using U.S. Treasury securities, while EURIBOR shows average lending rates among Eurozone banks. TONA, on the other hand, provides insight into overnight borrowing costs in Japan’s financial market.
This financing move aligns with India’s broader climate action goals, which include achieving net-zero emissions by 2070, as pledged by Prime Minister Narendra Modi at the COP-26 summit in Glasgow in 2021. Additionally, India aims to ramp up its non-fossil energy capacity to 500 GW by 2030, fulfill 50% of its energy requirements through renewable sources, cut projected emissions by 1 billion tonnes, and achieve a 45% reduction in carbon intensity compared to 2005 levels by 2030.
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