Railways says rate of interest on advances to contractors revised

The Indian Railways has tweaked the interest rate it charges on advance payment to its contractors. An order from the Railway Board Monday fixed the interest rate at Reserve Bank's bank rate plus 5% simple interest.

This will be applicable for tenders to be opened in the financial year 2022-23. This rate will be revised after three years. The interest rate was fixed at 10% for tenders opened in financial year 2021-22.

The current RBI bank rate is 4.25%. The Central Bank considers revising it during the bi-monthly meeting of the Monetary Policy Committee (MPC).

Contractors that are executing capital intensive projects worth more than Rs 25 crore are eligible to seek advances from the railways. But it seldom happens due to the strict nature of advance disbursal at zonal level and the terms under which this is allowed.