Finmin may consult RBI soon to resolve stress power sector problems
The Finance Ministry may soon hold talks with the Reserve Bank of India to resolve issues faced by the power sector and also seek some relaxation of the February 12 NPA guidelines, sources said today.
The ministry would consult the RBI as per the Allahabad High Court order, which today refused to give any interim relief to private power companies from the RBI's February 12 order on NPAs.
According to sources, around eight-nine commissioned power projects will be impacted by the Allahabad High Court order and banks have mostly provided for these stress projects.
In a bid to hasten the resolution of bad loans, the RBI on February 12 abolished half a dozen loan restructuring schemes and instead provided for a strict 180-day timeline for banks to agree on a resolution plan in case of a default or else refer the account for bankruptcy.
The Finance Ministry can consult RBI as per the provisions of Section 7 of The Reserve Bank of India Act, 1934. As per the Act "the Central Government may from time to time give such directions to the Bank as it may, after consultation with the Governor of the Bank, consider necessary in the public interest." The Finance Ministry could ask the RBI to provide 180 days for resolution of stressed power projects with a view to avoiding potential value erosion of operating plants.
If suggestions are accepted, banks would get about a year for restructuring their power sector loans of about Rs 1.74 lakh crore.
The High Court on May 31 stayed the February 12 RBI circular on companies other than wilful defaulters and directed the Finance Ministry to hold a meeting of all stakeholders on resolutions.
Acting on the direction, a meeting chaired by Financial Services Secretary Rajiv Kumar with all stakeholders was convened on June 22. On the basis on meeting, a report was prepared and sent to the Power Ministry for further action as per the Court order.
According to sources, the report pointed out that the commissioned power plants with capacity of about 40,000 MW needs to be considered differently to avoid potential value erosion and unreasonable haircut for banks that may happen otherwise.
During this additional period of 180 days, it said, banks should undertake more intensive monitoring of the said assets and its cash flow to save it from turning non-performing.
Similar recommendations were made by Standing Committee on Energy earlier in March.
The Parliamentary Committee recommended that an additional 180 days beyond the timelines prescribed under RBI's February 12 circular may be allowed to commissioned power projects which have been commissioned before February 12 or have not been referred to NCLT.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.