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NEW DELHI, Feb. 26

INDIAN Railway Finance Corporation Ltd (IRFC) has entered the overseas market with a plan to borrow $100 million which would be utilised to retire some of its earlier high cost loans, a top railway Ministry official said.

The borrowing arm of the Indian Railways has appointed Barclays Plc and HSBC as arrangers for the loan syndication which will have a tenure of five years.

"We are looking at a borrowing cost of 70 basis points above Libor which would translate into a rate of about 5 per cent including upfront fees and foreign exchange cover ", the official said.

The decrease in the borrowing cost will get reflected in a lower lease charges to be paid by the Railway Ministry to IRFC annually. For instance, the Railway Ministry paid lease charges of Rs 3,098 crores to IRFC during 2002-03. The budget for 2003-04 has fixed a target of Rs 2,970 crores as borrowings through IRFC.

But, the lease charges to be paid by Railways to IRFC during 2003-04 has been estimated at Rs 3,140 crores.

"This implies that while incremental assets to the tune of Rs 2,970 crores would be added during 2003-04, the incremental lease charges has gone up only by Rs 42 crores ", the official said. Attributing this to the tremendous savings in interest costs by IRFC, the official said that the impact of lower borrowing cost would be felt in the flattening of lease charges to be paid by the Railways.

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