FCI to borrow Rs 50,000 cr to meet short-term fund needs
The Food Corporation of India (FCI) is set to borrow Rs 50,000 crore to meet its short-term fund requirements. The government-owned corporation has invited bids from banks for a three-month tenure loan to meet its cash flow mismatch and procuremen...
The FCI has invited bids from banks for raising a three-month tenure loan to likely meet its cash flow mismatch and for the procurement and distribution of food grains, said a person familiar with the matter.
This short-term loan will be on an unsecured basis. Fully owned by the government, FCI has a paid-up capital of Rs 9,999.79 crore.
"The corporation has invited bids and generally, the interest rate for such tenure loans are around 7%," said a bank executive aware of the matter.
FCI, in its bids, has sought revolving credit, which essentially means it can avail short-term loans from lenders if their outstanding loan on the date of request is less than the quantum originally offered, irrespective of disbursements and repayments already done.
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Since FY22, the government has stopped the practice of FCI borrowing from the National Small Savings Fund, or NSSF.
As per the FY24 Budget, FCI is to borrow Rs 1.05 lakh crore through "others," which the government noted is working capital arrangements through banks to cover temporary cash requirements.
"Banks have the option to offer rates linked to MCLR, Repo, or Treasury bill rates," the corporation noted in its bid document.
In FY24, the corporation had approved a short-term loan limit of Rs 75,000 crore. As per the annual report, FCI in 2022-23 availed total short-term loans of Rs 1.18 lakh crore, of which ₹3,000 crore were outstanding as of March 2023.
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This is the third tranche of borrowing by FCI in the current financial year. "This year so far, FCI has borrowed in two tranches, in June and September," he said.
"These additional borrowings are largely on account of the extension of the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) scheme," said another bank official, adding that mostly state-run banks participate in the bidding process. In 2022-23, FCI repaid₹1.28 lakh crore to banks borrowed through this route.
