NHPC seeks norm relaxation to deposit funds

The National Hydro Power Corporation (NHPC) has asked the department of public enterprises (DPE) for a one time relaxation of its guidelines so as to allow the public sector undertaking to invite bids from bankers for interest rate on bulk deposits. The move comes after the PSU raised Rs 6,000 crore through its initial public offering in August last year and is now looking towards depositing surplus funds worth Rs 4,000 crore with a bank.

In January 2008,the finance ministry had asked the DPE to issue guidelines asking PSUs to stop the practice of inviting bids for interest rates being offered by banks on deposit of surplus funds. The move had been taken as it was found that some of the PSUs had been seeking rates higher than the card rates of the banks. NHPC has written to the DPE asking for a one time relaxation of this norm and the matter has been referred to the finance ministry for further comments, a senior government official told The Indian Express. Since,the decision to stop the practice of inviting bids was that of the finance ministry,a call on granting such an exemption is also expected to be made from the corridors of North Block especially with a slew of disinvestments planned for next year.

The purpose of the initial ban was to stop undesirable competition among banks to prevent arbitrary hikes in deposit rates. The perception was that banks were unable to reduce the lending rates due to the higher average cost of funds mobilised by them through such bidding processes. The government had also asked PSUs to deposit a minimum of 60 per cent of surplus funds with public sector banks.

NHPC had issued 10 per cent of its new equity shares in its August 2009 public offer while the government divested 5 per cent in the company. The IPO was over subscribed by as much as 23 times and was priced at the higher end of the price band of Rs 30-36 per share. It had come out with 167.73 crore shares.