REC- 1-51.p65 - Rural Electrification Corporation Ltd.

The amount referred to in (a) above are dependent upon the
outcome of settlement of court/arbitration cases.
The amount under 1 (c) include Rs. 1,73,970 lacs against
Letters of Comfort issued to various Banks for opening of
Letters of credit to procure generation equipment against
loan sanctioned by the Corporation to its borrowers, Rs
1,557.65 lacs pertain to the difference in the interest rate
being charged on private parties that have not been graded
and whose loans are being charged at the highest rate
applicable to the lowest graded borrowers, Rs.668.50 lacs
against demand raised by the Income tax Department for
Assessment Year 2008-09 against Notice u/s 143(1) of Income
Tax Act and Rs. 363.52 lacs which was paid to the Income
Tax Dept. against the demand raised by them on completion
of assessment for AY 2006-07 for which appeal has been
filed with CIT (Appeals) and the amount paid has been
shown as Advance Income Tax in Current Liabilities and
Provisions schedule in the Balance Sheet.
2. The Corporation is registered with the Reserve Bank of India
(RBI) as a Non-Banking Financial Company (NBFC) since
1997-98. As per notification No. DNBS (PD), CC No. 12/
D2.01/99-2000 dated 13.1.2000 of RBI, Govt. Companies
conforming to Section 617 of the Companies Act have been
exempted from applicability of the provisions of RBI Act
1934 relating to maintenance of liquid assets and creation
of Reserve Funds and the Directions relating to acceptance
of public deposits and prudential norms. The said
notification is also applicable to REC, being a Govt. Company
conforming to Section 617 of the Companies Act, 1956.
Moreover in view of the non applicability of the provisions
of section 45 (I) C of the RBI Act, 1934 regarding creation of
Reserve Fund, the Reserve Fund is not created.
3. In order to bring all “systemically important” governmentowned
NBFCs within the framework of the prudential norms,
the RBI had advised our Corporation on December 12, 2006
to submit a ‘road map’ for compliance with various elements
of the regulations governing NBFCs. However, the RBI had
noted that the date from which our Corporation was required
to comply with such regulations would be decided later.
While our Corporation has submitted the said ‘road map’,
to Ministry of Power for onward submission/approval of RBI,
it has sought exemption from compliance with the
regulations governing NBFCs till the period of the 12th Five
Year Plan (FY2017).
Further, on December 13, 2006 and February 21, 2009, our
Board of Directors approved our adoption of prudential
norms. Our prudential norms limit our exposure, separately,
for private and state sector borrowers. For private sector
borrowers, our exposure is restricted to any single borrower
for up to 25% of our Corporation’s owned funds and to a
single group of companies for up to 50% of our Corporation’s
owned funds. In respect of loans to state sector borrowers,
our maximum credit exposure varies from 100% to 250% of
our Corporation’s net worth, depending on entity appraisal
and status of on bundling of the respective state utilities.
4. There has been shortfall in creation of Special Fund by some
of the RE Cooperative Societies amounting to Rs. 301.45 lacs
(Previous year Rs.500.89 lacs) and the societies are pursued
to create the required Special Fund.
5. Balance confirmation has been received from most of the
borrowers.
6. Income Tax as applicable in respect of Interest accrued on
bonds is deducted at source at the time of actual payment of
interest to the bond holders since such bonds are freely
transferable.
7. The formalities regarding registration of conveyance deeds
etc. in respect of some of the Land & Building acquired by
the Corporation amounting to Rs. 3,630.58 lacs (Previous
year Rs. 3,996.51 lacs) are in the process of completion.
8. In terms of Accounting Policy No. 10.2, the balances in
respect of Interest Warrants Accounts (both for institutional
and 54EC & Infra bonds) as on 31.03.2010 held in specified
banks are Rs. 3,431.32 lacs (previous year Rs.5,025.32 lacs).
9. In the opinion of the management, the current assets, loans
and advances appearing in the balance sheet have a value
equivalent to the amount stated therein if realized during
the ordinary course of business and all known liabilities have
been provided.
10. Provision for impairment loss as required under Accounting
Standard-28 on impairment of Assets is not necessary as in
the opinion of management there is no impairment of the
Corporation’s Assets in terms of AS-28.
11. The company has no outstanding liability towards Micro,
Small and Medium undertakings.
12. No Bond Redemption Reserve (BRR) has been created since
in terms of clarifications issued by the Department of
Company Affairs, Govt. of India vide no.6/3/2001-CL.V dated
18.4.2002, BRR is not required to be created in the case of
privately placed debentures issued by NBFC’s registered with
the RBI under section 45-IA of the RBI (Amendment) Act,
1997.
13. During the year, the Corporation has reduced cost of
borrowing to the extent of Rs.765.69 lacs (Previous year Rs.
420.16 lacs) on account of swap (coupon only) transaction
linked to rupee borrowing.
The Corporation had entered into various coupons only swap
transactions and cross currency swap transactions. The Net
Mark to Market position in respect of the above swap
transactions as on 31.03.2010 is of Rs. 16,544.12 lacs
(favourable) (Previous year Rs.24,271.25 lacs favourable).
14. Directors’ Remuneration:
(Rs. in lacs)
Particulars Year ended Year ended
31.03.2010 31.03.2009
Salaries and Allowances 75.53 44.33
Perquisites/reimbursement 10.10 15.18
Retirement Benefits Nil 6.70
Total 85.63 66.21
The Chairman and Managing Director and other whole time
Directors have also been allowed to use Staff car including
for private journey(s) up to a ceiling of 1000 kms per month
on payment of monthly charges of Rs. 780/- per month as
per DPE guidelines.
Loans and Advances include Rs. 4.38 lacs (Previous year
Rs.10.66 lacs) due from Directors of the Corporation,
maximum amount outstanding during the year Rs.10.66 lacs
(Previous year Rs.14.17 lacs).
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