Indian Government approved a Short-term Loan of Rs 5000 crore for Food Corporation of India (FCI)

The Indian government approved a short-term loan of Rs 5000 crore for Food Corporation of India (FCI) on 29 March 2011. The government’s short term loan will help FCI to meet its working capital requirements this fiscal. The proposal to grant the loan to the organisation was cleared in the Cabinet Committee on Economic Affairs (CCEA) meeting held on 29 March. Grant of the short-term loan of Rs 5000 crore to FCI will enable it to carry out its mandated activities of procurement, storage and distribution of foodgrains as per government policy.

The CCEA observed that the arrangement of financing (short-term loan) would be cheaper than the option of hiking the FCI's cash credit limit (CCL) to enable it to borrow more funds. The short term loan will attract interest at the rate of 10.60 per cent per annum only. Currently FCI has fully utilised the CCL of Rs 34495 crore that was sanctioned by a consortium of banks for meeting its working capital requirements.

CCL is a secured working capital loan given by banks on the basis of turnover, debtors, creditors and stock in hand.

FCI which is the nodal agency for procurement and distribution of foodgrains, will repay the loan in the next fiscal (2011-12).