REC- 1-51.p65 - Rural Electrification Corporation Ltd.
REC- 1-51.p65 - Rural Electrification Corporation Ltd.
REC- 1-51.p65 - Rural Electrification Corporation Ltd.
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The amount referred to in (a) above are dependent upon the<br />
outcome of settlement of court/arbitration cases.<br />
The amount under 1 (c) include Rs. 1,73,970 lacs against<br />
Letters of Comfort issued to various Banks for opening of<br />
Letters of credit to procure generation equipment against<br />
loan sanctioned by the <strong>Corporation</strong> to its borrowers, Rs<br />
1,557.65 lacs pertain to the difference in the interest rate<br />
being charged on private parties that have not been graded<br />
and whose loans are being charged at the highest rate<br />
applicable to the lowest graded borrowers, Rs.668.50 lacs<br />
against demand raised by the Income tax Department for<br />
Assessment Year 2008-09 against Notice u/s 143(1) of Income<br />
Tax Act and Rs. 363.52 lacs which was paid to the Income<br />
Tax Dept. against the demand raised by them on completion<br />
of assessment for AY 2006-07 for which appeal has been<br />
filed with CIT (Appeals) and the amount paid has been<br />
shown as Advance Income Tax in Current Liabilities and<br />
Provisions schedule in the Balance Sheet.<br />
2. The <strong>Corporation</strong> is registered with the Reserve Bank of India<br />
(RBI) as a Non-Banking Financial Company (NBFC) since<br />
1997-98. As per notification No. DNBS (PD), CC No. 12/<br />
D2.01/99-2000 dated 13.1.2000 of RBI, Govt. Companies<br />
conforming to Section 617 of the Companies Act have been<br />
exempted from applicability of the provisions of RBI Act<br />
1934 relating to maintenance of liquid assets and creation<br />
of Reserve Funds and the Directions relating to acceptance<br />
of public deposits and prudential norms. The said<br />
notification is also applicable to <strong>REC</strong>, being a Govt. Company<br />
conforming to Section 617 of the Companies Act, 1956.<br />
Moreover in view of the non applicability of the provisions<br />
of section 45 (I) C of the RBI Act, 1934 regarding creation of<br />
Reserve Fund, the Reserve Fund is not created.<br />
3. In order to bring all “systemically important” governmentowned<br />
NBFCs within the framework of the prudential norms,<br />
the RBI had advised our <strong>Corporation</strong> on December 12, 2006<br />
to submit a ‘road map’ for compliance with various elements<br />
of the regulations governing NBFCs. However, the RBI had<br />
noted that the date from which our <strong>Corporation</strong> was required<br />
to comply with such regulations would be decided later.<br />
While our <strong>Corporation</strong> has submitted the said ‘road map’,<br />
to Ministry of Power for onward submission/approval of RBI,<br />
it has sought exemption from compliance with the<br />
regulations governing NBFCs till the period of the 12th Five<br />
Year Plan (FY2017).<br />
Further, on December 13, 2006 and February 21, 2009, our<br />
Board of Directors approved our adoption of prudential<br />
norms. Our prudential norms limit our exposure, separately,<br />
for private and state sector borrowers. For private sector<br />
borrowers, our exposure is restricted to any single borrower<br />
for up to 25% of our <strong>Corporation</strong>’s owned funds and to a<br />
single group of companies for up to 50% of our <strong>Corporation</strong>’s<br />
owned funds. In respect of loans to state sector borrowers,<br />
our maximum credit exposure varies from 100% to 250% of<br />
our <strong>Corporation</strong>’s net worth, depending on entity appraisal<br />
and status of on bundling of the respective state utilities.<br />
4. There has been shortfall in creation of Special Fund by some<br />
of the RE Cooperative Societies amounting to Rs. 301.45 lacs<br />
(Previous year Rs.500.89 lacs) and the societies are pursued<br />
to create the required Special Fund.<br />
5. Balance confirmation has been received from most of the<br />
borrowers.<br />
6. Income Tax as applicable in respect of Interest accrued on<br />
bonds is deducted at source at the time of actual payment of<br />
interest to the bond holders since such bonds are freely<br />
transferable.<br />
7. The formalities regarding registration of conveyance deeds<br />
etc. in respect of some of the Land & Building acquired by<br />
the <strong>Corporation</strong> amounting to Rs. 3,630.58 lacs (Previous<br />
year Rs. 3,996.51 lacs) are in the process of completion.<br />
8. In terms of Accounting Policy No. 10.2, the balances in<br />
respect of Interest Warrants Accounts (both for institutional<br />
and 54EC & Infra bonds) as on 31.03.2010 held in specified<br />
banks are Rs. 3,431.32 lacs (previous year Rs.5,025.32 lacs).<br />
9. In the opinion of the management, the current assets, loans<br />
and advances appearing in the balance sheet have a value<br />
equivalent to the amount stated therein if realized during<br />
the ordinary course of business and all known liabilities have<br />
been provided.<br />
10. Provision for impairment loss as required under Accounting<br />
Standard-28 on impairment of Assets is not necessary as in<br />
the opinion of management there is no impairment of the<br />
<strong>Corporation</strong>’s Assets in terms of AS-28.<br />
11. The company has no outstanding liability towards Micro,<br />
Small and Medium undertakings.<br />
12. No Bond Redemption Reserve (BRR) has been created since<br />
in terms of clarifications issued by the Department of<br />
Company Affairs, Govt. of India vide no.6/3/2001-CL.V dated<br />
18.4.2002, BRR is not required to be created in the case of<br />
privately placed debentures issued by NBFC’s registered with<br />
the RBI under section 45-IA of the RBI (Amendment) Act,<br />
1997.<br />
13. During the year, the <strong>Corporation</strong> has reduced cost of<br />
borrowing to the extent of Rs.765.69 lacs (Previous year Rs.<br />
420.16 lacs) on account of swap (coupon only) transaction<br />
linked to rupee borrowing.<br />
The <strong>Corporation</strong> had entered into various coupons only swap<br />
transactions and cross currency swap transactions. The Net<br />
Mark to Market position in respect of the above swap<br />
transactions as on 31.03.2010 is of Rs. 16,544.12 lacs<br />
(favourable) (Previous year Rs.24,271.25 lacs favourable).<br />
14. Directors’ Remuneration:<br />
(Rs. in lacs)<br />
Particulars Year ended Year ended<br />
31.03.2010 31.03.2009<br />
Salaries and Allowances 75.53 44.33<br />
Perquisites/reimbursement 10.10 15.18<br />
Retirement Benefits Nil 6.70<br />
Total 85.63 66.21<br />
The Chairman and Managing Director and other whole time<br />
Directors have also been allowed to use Staff car including<br />
for private journey(s) up to a ceiling of 1000 kms per month<br />
on payment of monthly charges of Rs. 780/- per month as<br />
per DPE guidelines.<br />
Loans and Advances include Rs. 4.38 lacs (Previous year<br />
Rs.10.66 lacs) due from Directors of the <strong>Corporation</strong>,<br />
maximum amount outstanding during the year Rs.10.66 lacs<br />
(Previous year Rs.14.17 lacs).<br />
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