Finmin may consult RBI soon to resolve stress power sector problems, seek some relaxation

New Delhi: 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 12 February non-performing asset (NPA) guidelines, sources said on Monday.

The ministry would consult the RBI as per the Allahabad High Court order, which on Monday refused to give any interim relief to private power companies from the RBI's 12 February 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 12 February 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.

Independent power producers had challenged the RBI order which mandated the lenders to initiate process under IBC if resolution plan is not approved by 27 August.

The high court also said that the central government shall consider initiation of the consultative process contemplated under Section 7 of RBI Act, and conclude the same within 15 days from Monday.

Representational image. PTI.

Representational image. PTI.

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 31 May stayed the 12 February 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 22 June. On the basis of the 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 12 February circular may be allowed to commissioned power projects which have been commissioned before 12 February or have not been referred to NCLT.


Updated Date: Aug 28, 2018 09:07 AM

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