SBI likely to step in for Metro projects’ finance at a very low interest rate

The two-day crucial meetings involving Chief Minister A Revanth Reddy, Union Coal Minister Kishan Reddy, Railway Minister Ashwini Vaishnaw and Urban Development Minister Manohar Lal Khattar seem to have paved the way for a new financing model, with the State Bank of India (SBI) likely to emerge as the principal lender for both the Hyderabad Metro Rail Phase-I takeover and Phase-II expansion.

Sources said the Centre’s likely entry into the project is expected to enable funding at an interest rate of around 2%, substantially lower than the nearly 9% interest burden the State government would have faced had it gone for independent financing.

According to sources, the proposed financing structure has effectively ended the possibility of the Indian Rail Finance Corporation (IRFC) funding the project. The Railway Ministry is understood to have maintained that IRFC’s primary mandate is to finance railway infrastructure projects.

The latest developments also appear to have eased political tensions involving Mr. Revanth Reddy and Mr. Kishan Reddy, with the former charging the latter with deliberately obstructing the project or unwilling to extend support for the metro expansion. However, Kishan Reddy’s efforts in arranging meetings with key Union ministers and facilitating discussions between have helped move the project in a positive direction.

While the takeover of Metro Phase-I by the State government may still face procedural delays, officials believe the latest consultations have created a conducive environment for both the takeover proposal and the launch of Metro Phase-II.

The outcome is being termed as a win-win situation for both Mr. Revanth Reddy and Mr. Kishan Reddy. While the Chief Minister stands to benefit from securing low-cost financing for a critical infrastructure project, Mr. Kishan Reddy can claim credit for bringing the Centre and the State government together to find a viable solution.