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In FY20, REC is targeting 10% rise in revenue, NPAs at 4.1%. And what else?

According to the MoU, the PSU will aim to maintain its non-performing assets or bad loans at 4.1 percent under ‘excellent’ performance scenario
New Delhi: In financial year 2019-20, state-run Rural Electrification Corporation (REC) is aiming to increase its revenue by over 10 percent at Rs 28,000 crore. The public sector undertaking (PSU) posted a turnover of Rs 25,310 crore in financial year 2018-19. The company is a public infrastructure finance company in India’s power sector and the main source of its income is in the interest incurred on advances and loans.

MoU signed with Ministry of Power

The PSU has signed a Memorandum of Understanding (MoU) with the Ministry of Power on Friday, spelling out the targets for the current financial year. According to the MoU, the company’s performance would be rated “very good” if it achieves Rs 27,000 crore net revenue from operations and “good” if it records Rs 25,000-crore turnover this fiscal.

Targets FY20 for REC

According to the MoU, the PSU will aim to maintain its non-performing assets or bad loans at 4.1 percent under “excellent” performance scenario. PFC also aims to disburse Rs 6,000 crore for renewables. It is also targeting to achieve return on equity at 16 percent this fiscal. The company will also aim to use 98 percent of its funds to finance power sector projects this fiscal.

Why are MoUs signed?

Every year, PSUs sign MoUs with their administrative ministries. However, this year, REC has entered into an MoU with Power Finance Corporation as the latter bought the government’s stake in the company earlier this year. The MoU contains various parameters relating to financial performance and sets targets for every financial year.