Finance Ministry To Soon Meet Power Ministry On Stricter Bad Loan Norms, Says RK Singh

The finance ministry officials will meet the power ministry in a few days to deliberate on the Reserve Bank of India’s stricter bad loan norms.

That’s after the Allahabad High Court last week directed that no action should be taken against stressed power companies on the basis RBI’s new stressed assets framework till the finance ministry hears the contention. “We have asked the Ministry of Finance to convene a meeting and it will happen soon,” RK Singh, Minister of State (Independent Charge) for Power and Renewable Energy, said at the sidelines of a press conference in New Delhi today.

The Association of Power Producers had moved the high court saying the RBIs Feb. 12 circular, which laid down strict timelines over which insolvency proceedings must be initiated, may push power projects with a capacity of about 60,000-70,000 megawatts towards bankruptcy. The banking regulator mandated that banks classify even a one-day delay in debt servicing as default. For accounts with an exposure of Rs 2,000 crore or more, banks will have to ensure that a resolution plan is in place within 180 days after a ‘default’.

The power minister confirmed that State Bank of India and other Indian lenders have agreed on a plan to revive a third of India’s stressed power plants. Lenders are currently evaluating 11 of the 34 stressed power projects for acquisition by new promoters under the Samadhan scheme, Singh said. Lanco Infratech Ltd. and Jindal India Thermal Power Ltd. will also be part of the scheme, he added.

Under the scheme, lenders will assess the sustainable debt for each company and the remaining debt will be turned into equity which will be held by the banks, Singh told BloombergQuint in an interview. “The scheme will look at running the project and not divestment.” Existing promoters will not be allowed to hold more than 24.5 percent in the project, he added.