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MUMBAI, July 17

THE Washington-based International Finance Corporation (IFC) has signed an agreement with Mahindra and Mahindra Financial Services Ltd (MMFSL) to provide a finance package of Rs 84 crore for the company.

The package will consist of a subordinated loan of Rs 35 crore at an interest rate of slightly higher than 10 per cent and a senior loan of Rs 49 crore at an expected interest rate of less than 10 per cent.

The first tranche of Rs 35 crore subordinated loan has already been drawn at 10.1 per cent. The subordinated loan is unsecured and will be considered as Tier II capital as per RBI guidelines.

MMFSL will use IFC's loan to develop new businesses, financing of new and second-hand vehicles and purchases for agricultural inputs.

The company is considering getting into the insurance distribution business shortly and is in talks with several insurance companies in this regard, Mr Ramesh G. Iyer, Managing Director, MMFSL, said here on Wednesday.

The long-term loan will enable MMFSL to satisfy the growing demand for asset financing and insurance in rural areas and help bring longer term financial products to rural India, said Mr Bharat Doshi, Executive Director and President, Trade and Financial Services, M&M.

The loan syndication project is part of a broader IFC strategy to build a portfolio of local currency products to provide clients in India with long term financing without imposing currency risk.

"The currency risk will be transferred to our counter party banks with whom we have entered into swap agreements'', said Mr Rajagopal Raman, Investment Officer, South Asia Department, IFC.

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