SynopsisIndian power and renewable energy firms are looking abroad for loans. The Reserve Bank of India's new dollar-rupee swap facility has made foreign currency borrowing cheaper. Companies like REC and PFC are planning to raise significant funds through external commercial borrowings. This move is expected to lower borrowing costs for these public sector undertakings.Listen to this article in summarized formatET BureauNew Delhi | Mumbai: Power and renewable energy financing companies are exploring overseas borrowings after the Reserve Bank of India's new dollar-rupee swap facility lowered hedging costs, making foreign currency loans more attractive, people aware of the development said.State-run REC plans to raise $500 million through a five-year external commercial borrowing (ECB).Power Finance Corp (PFC) has issued a request for proposal inviting bids to raise funds by way of foreign currency term loan, and the last date for submission of bids is June 22. The President has approved the merger of REC with Power Finance Corporation, nearly seven years after PFC acquired the government's majority stake in REC.ET BureauREC, IREDA, PFC exploring opportunitiesIndian Renewable Energy Development Agency (Ireda) is also evaluating opportunities to "aggressively" go for the overseas lending option, one of the people said.Discussions are underway with banks and potential lenders, with several companies keen to secure a first mover advantage and lock in funds, another person said.On Monday, the RBI announced a dollar-rupee swap window at a fixed cost of 1.5% per annum for public sector undertakings raising ECB and banks mobilising overseas foreign currency borrowings. The facility is available for fresh borrowings with maturities of three years and above and will remain open for eligible drawdowns until December 31, 2026.Power sector public sector undertakings such as NTPC are also in discussions with some banks to discuss proposals, two people said. However, the power giant is still evaluating the specifics and actual advantages and "nothing has been decided yet," one of them said."There is enough supply of funds as banks have been waiting to grant fresh loans since last year since the USD market was costly," one of the persons said.REC's borrowing is expected to be priced around 100 basis points over the five-year US Treasury yield of about 4.3%. One basis point is a hundredth of a percentage point. Including the RBI's fixed hedging cost of 1.5%, REC's all-in rupee cost would be about 6.8%, around 50 basis points lower than domestic borrowing costs of 7.4% for comparable tenures. ECBs should also make it easier for the private sector to raise funds at home.Bankers said the new framework has made offshore funding cheaper and attractive. REC's proposed borrowing is expected to cost about 50-60 basis points less than comparable domestic bond funding.The company had priced a three-year domestic bond issue earlier this week at 7.38%, according to market participants. In comparison, the proposed ECB could be raised at an effective cost of around 6.8%, while also bringing dollar inflows into the country."The RBI swap has effectively created a predictable hedging mechanism and narrowed uncertainty around foreign currency funding costs," said a debt capital markets banker.REC, Ireda, PFC and NTPC did not respond to emails seeking response till the press time on Wednesday.PFC's standalone loan asset book stood at ₹5.70 lakh crore while REC had a loan book of ₹5.84 lakh crore in March end.Read More News on...moreless