InvestorQ : Why is the government relaxing lending norms for power financing companies?
diksha shah made post

Why is the government relaxing lending norms for power financing companies?

Answer
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Archita Jajjoo answered.
1 month ago


The central government has relaxed the lending norms for PFC and REC, the two largest power finance companies in India. This relaxation specifically pertains only to the funding for power distribution companies or discoms with respect to working capital loans.

This will be a one-time relaxation offered by PFC and REC to lend for working capital above the 25% revenues limit for a temporary period to overcome the liquidity crunch. Currently, working capital lending is restricted to 25% of total revenues in any year.

It may be recollected that in the last few months, the revenues of power discoms nosedived as people were unable to pay their power bills on time. This was largely due to a sharp fall in their income levels and a consequent impact on purchasing power.

Discoms have managed to sustain the supply of power in most cases despite the tough financial strain imposed. The liquidity infusion will ensure that power supply is sustained, irrespective of demand. REC is already a subsidiary of PFC.