Clarification of REC on compliance of RBI Norms

There has been coverage in several media reports yesterday that Rural Electrification Corporation Ltd. (REC) has not followed the RBI norms while sanctioning/approving a few private sector projects.

The Media reports are supposed to have been based on report of Comptroller and Auditor General (CAG) report which was tabled in the Parliament yesterday. The C&AG report under reference is a combined report for Rural Electrification Corporation Ltd. (REC) and Power Finance Corporation Ltd. (PFC). The remarks of the CAG regarding noncompliance of RBI norms, do not pertain to REC. As a matter of fact the CAG itself under para 1.3 of the said report has stated that REC has followed the prudential norms of RBI in recognizing its NPAs since 2014-15.

Further, this Report is for strengthening the system of appraisal, and REC has already initiated action in areas where there was scope for improvement.

The CAG has, on many occasions, appreciated REC for following RBI norms and its efforts for the strengthening of the existing system like appointment of dedicated Project Management Consultants (PMC) stationed at Project site, continuous monitoring of cash flow by Concurrent Auditors etc.

Statutory Auditors have given an unqualified opinion and C&AG of India have given NIL comments on the Annual Accounts for the financial year 2016-17. REC’s NPA levels are very low (Gross 2.41% and Net 1.60% as on 31.03.2017) which is lowest in the industry as compared to our peers. There is continuous review of the appraisal guidelines based on the various inputs as received from time to time from the industry experts/consultants, audit comments from REC’s Internal Audit Division, Statutory Auditors, C&AG etc.

Rural Electrification Corporation Limited (REC) is a Navratna CPSE under the aegis of Ministry of Power, Government of India and the Office of Comptroller & Auditor General of India (C&AG) conducts the supplementary audit of its financial statements; and the Corporation stands committed to maintaining the highest norms of corporate governance & probity.

The Corporation has also clarified the stand with Stock Exchange and a copy of the letter sent is enclosed herewith.