The shabby affairs being run in Nagpur Municipal Corporation (NMC) has again put it on the wrong foot. A loan of Rs 200 crore procured by cash-starved Nagpur Municipal Corporation (NMC) has put the civic body at a loss of Rs 26.87 lakh on account of incorrect resetting of interest rate.

According to the information provided by the NMC administration to the question raised by Congress Corporator Sandeep Sahare in the General Body Meeting held on October 16, 2017, the NMC took a loan of Rs 200 crore from Bank of Maharashtra under JNNURM for raising its share fou augmented water supply Pench-4 scheme and other projects on March 31, 2010. The interest rate of the loan was 8.5 percent and is rest according to Bank’s Prime Lending Rate (BPLR). Till to date, the NMC has paid Rs 212.96 crore to the Bank on account of interest. Similarly, out of principal amount of Rs 200 crore loan, the civic body has repaid 166.26 crore. As of now, Rs 33.73 crore is the balance amount to be paid by the NMC.

However, according to the audit report, the NMC suffered the loss of Rs 26.87 lakh on account of incorrect resetting of interest rate. The audit report says that the NMC made the proposal for term loan of Rs 200 crore to finance the civic body’s contribution for “Augmentation to Nagpur City Water Supply – Pench-IV Scheme.” Bank of Maharashtra (BoM) vide its letter No. AV48/JNNURM/09 dated 5.1.2010 conveyed to NMC about sanctioning of the loan of Rs 200 crore. The terms and conditions among others mentioned were as under:

Rate of interest: Bank’s Prime Lending Rate (BPLR) – 2.75%, presently 9.50% per annum with monthly rests. The interest rate was to be reset for the first time on the scheduled date of completion of the project i.e. 1.4.2011 and subsequently on April 1 every year.

Repayments: The loan shall be repayable in 84 instalments of Rs 2.38 crore after initial moratorium period of 19 months from the date of first disbursement. The first instalment will be due on 31.7.2011. The interest during moratorium period and thereafter shall be serviced as and when applied. Accordingly, NMC entered into an agreement with BoM for this term loan of Rs 200 crore on 31.3.2010.

However, scrutiny revealed that BoM vide their letter No. AV48/JNNURM/10 dated 28.6.2010 conveyed the approval for reduction in rate of interest w.e.f 28.6.2010. The details of which were as under:

Rate of interest under existing terms and conditions: BPLR-2.75%, presently 9.50% per annum with monthly rests. The interest rate was to be reset for the first time on the scheduled date of completion of the project i.e. 1.4.2011 and subsequently on April 1 every year.

Rate of interest under amended terms and conditions: BPLR-3.75%, presently 8.50% per annum with monthly rests. The interest rate was to be reset for the first time on the scheduled date of completion of the project i.e. 1.4.2011 and subsequently on April 1 every year.

It is further revealed that the BoM vide their letter No. AV48/JNNURM/10 dated 17.1.2011 conveyed to NMC that the interest on term loan is changed to BPLR-3.75% = 9.75% w.e.f. 10.1.2011 and offered NMC to exercise the option for the same if it wanted the interest on this loan to be linked to base rate which is 9.5% w.e.f. 10.1.2011.

According to Sahare, the NMC had negotiated agreement for procuring the loan from BoM at the interest rate of 8.5%. However, the bank is recovering the interest at the rate of 9.50%. Moreover, the BoM vide its letter AV48/Loan Pench-IV/11 dated 17.8.2011 conveyed the NMC that the interest rate for the said loan is 10.5% and demanded additional amount of Rs 1.19 crore on account of interest rate. Similarly, the BoM vide its letter No. AV48/JNNURM/11-12 dated 8.11.2017 conveyed the NMC that the interest rate for the said loan is 10.70% and demanded additional amount of Rs 3.45 crore on account of interest rate. Subsequently, NMC on 25.6.2012 sent a letter to BoM mentioning the Rs 200 crore loan along with a cheque No. 167849 dated 19.6.2012 for the amount Rs 10.19 crore as pending dues on account of difference of interest rate.

Sahare further said that when other financial institutes were ready to provide the loan at lower interest rate then why the NMC took the loan from Bank of Maharashtra. The bank, instead of agreed 8.5% interest rate (fixed), reset the interest rate at 9% on December 15, 2010, 9.5% on January 7, 2011 and 10% or more on January 31, 2011 and recovered the difference from the NMC. The office of Auditor General (Accounts), Nagpur, raised objection on the matter in its audit report of 2017.

According to the audit report, the civic body suffered loss of Rs 26.87 lakh on account of incorrect resetting of interest rate.