RBI to banks: Take call on stressed sector exposure

In the power sector,according to RBI estimates,reported NPA is around Rs 770 crore

Written by Anil Sasi | New Delhi | Published: February 3, 2012 1:06 am

The RBI has put the ball squarely with the banks on the question of whether to take fresh exposure to the power sector in the wake of fuel woes and mounting distribution sector losses raising serious viability concerns.

“The Reserve Bank has made it clear that it will not be intervening in the issue of fresh exposure by lenders. The position taken by the banking regulator is that,for now,it is up to the banks to take a business decision on a case-by-case basis. If the Electricity Boards come up with a credible plan for restructuring and for servicing the loan that they take,banks have been asked to resume loan disbursements,” a banking sector executive involved in the exercise said. In states where the utilities are yet to come up with a restructuring plan,banks have been advised to consider suspending the lines of credit.

The RBI’s position is based on the premise that given the aggregate numbers,while a warning note is warranted,there is still no cause for alarm. There have been a handful of instances where banks have suspended the lines of credit to some distribution utilities and in some states,Chief Ministers have written to the RBI for intervention in the matter.

According to RBI data,given the non performing assets or NPA position of the banks,even at the gross NPA level,the figure has now risen to 2.8 per cent from about 2.26 per cent in 2007. In some sectors such as iron and steel or textile,it is estimated to be as high as 3.5 per cent. In the power sector,according to RBI estimates,reported NPA is around Rs 770 crore out of the portfolio of Rs 2.68 lakh crore.

The worries on stressed assets come at a time when State Bank of India is said to have initiated talks with the banking sector regulator on possible restructuring of loans to the power sector projects without the bank being required to make any provisioning. ICICI Bank leads the pack with respect to exposure to the power sector,having an exposure of Rs 37,233 crore to the sector,followed by SBI with Rs 36,915 crore. Axis Bank ranks third with Rs 17,110.60 crore. Rating agencies have questioned the lending done by banks specially to power utilities companies.

A recent study by rating agency CRISIL has pointed out that Rs 56,000-crore exposure of banks to the power sector could be under stress,blaming it on the losses of distribution companies that have doubled to Rs 40,000 crore in 2010-11 from 2008-09. The finance ministry had asked state-owned banks to offer details of company-wise exposure to loans in four sectors — aviation,telecom,real estate and power.

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