A Power Plant (Photographer; Prashanth Vishwanathan/Bloomberg)

RBI Denies Forbearance For Stressed Power Assets

The Reserve Bank of India has denied any forbearance to stressed accounts in the power sector, in a move that could push many of these towards bankruptcy, according to Power Secretary Ajay Kumar Bhalla.

The banking regulator has put the ball in the power ministry’s court, saying it does not look at sectoral issues, Bhalla told BloombergQuint in an interview. “We have said that the sectoral issues may be seen differently on which RBI, as a bank regulator, said it doesn’t look at sectoral issues. It is for the Ministry of Power to look at those issues.”

The RBI’s new stressed assets framework could push approximately 60,000-70,000 MW power projects towards bankruptcy proceedings, Ashok Khurana, Director General, Association of Power Producers told reporters earlier.

Also read: Nearly 10,000 MW Coal-Based Capacity Remains Unviable, Power Secretary Says

India’s power sector is one of the largest contributors of stressed assets— holding nearly Rs 1.8 lakh crore in loans—plaguing the country’s financial system. The problems with the power assets are dual sided. Apart from financial restructuring, these companies and assets also need regulatory changes regarding availability of coal and power purchase agreements, tariffs and delays in payments, Bhalla said.

The power ministry is currently in talks with State Bank of India to resolve the regulatory issues, he said. “We think if SBI puts pressure, then all the lenders can come together.”

Also read: Banks Come Up With Plan-B To Rescue Stressed Power Projects