In what is the largest line of credit offered by banks for retail financing, two banks have offered more than Rs 10,000 crore (Rs 100 billion) to finance the mobile handsets and airtime costs of Reliance Infocomm's customers.
Of this, ICICI Bank itself has offered the largest line of credit of Rs 9,000 crore (Rs 90 billion), with HDFC Bank being the other bank to provide similar facilities.
As per the modalities of the scheme, customers would have to put up a margin of Rs 3,000. The customer is expected to give 12 post-dated cheques, one per quarter, for Rs 1,800 each.
The banks will be charging an interest of 12.5 per cent per annum, which incidentally is also the lowest rate for consumer durable financing. Generally, banks charge 18-19 per cent interest on consumer durable loans.
The touchpoint for the customers will be Reliance Capital, the finance arm of the Reliance group, which will, after initial screening, forward loan applications to the banks.
After assessing the risk profile of the potential customer, the bank will have the discretion to accept or reject the application. In due course, the banks may securitise these loans and sell them to other banks.
ICICI Bank has offered a Rs 9,000 crore line of credit for financing Reliance Infocomm's customers while HDFC Bank has not finalised any definite amount.
These lines of credit will be used over the next three years, as and when the customer base increases.
Reliance Infocomm has targeted a customer base of 10 million subscribers within a year of launch, according to a Reliance group official, who confirmed the financing deal.
Though Reliance is not offering a counter-guarantee to the banks to cover defaults, the banks have worked out an arrangement with the company under which they can secure the loans against the unused airtime of the customers.
This airtime amount will be kept as an escrow account with the banks to enable them to resell it as and when the need arises. The finer details are being worked out.
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