Stressed power assets: Centre unlikely to issue directions to RBIhttps://indianexpress.com/article/business/banking-and-finance/stressed-power-assets-centre-unlikely-to-issue-directions-to-rbi-5331709/

Stressed power assets: Centre unlikely to issue directions to RBI

As per Section 7 of the RBI Act, Centre may, after consultation with the Governor, give directions to RBI as it may consider necessary in the public interest.

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The Allahabad High Court on Monday had declined to provide relief to private power producers against the February 12 circular of the RBI, according to which these accounts should be sent to bankruptcy courts if a resolution was not found by August 27. (Representational)

The government will hold inter-ministerial consultations on the stressed power assets issue on Friday even as it has firmed up view to not issue directions to the Reserve Bank of India (RBI) under Section 7 of the RBI Act.

A top finance ministry official on Wednesday said that Section 7 of RBI Act is to be invoked in exceptional circumstances and that the central bank should rather take a pragmatic view on resolving stressed assets in the power sector.

The Allahabad High Court on Monday had declined to provide relief to private power producers against the February 12 circular of the RBI, according to which these accounts should be sent to bankruptcy courts if a resolution was not found by August 27. The court, however, asked the Centre to talk to the central bank to get some relief for the petitioners using the provisions of the RBI Act within 15 days.

The official said that as per the estimates of the finance ministry, “only 10 companies” will get impacted since the court has refused to grant relief to the stressed power companies and hence they would be covered by RBI’s 180 day circular. “Of this, five can be revived and five will be restructured through Insolvency and Banking Code (IBC),” the official said.

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“The government is unlikely to issue directions to RBI under Section 7 of RBI Act. It can be invoked only in exceptional circumstances and the power asset issue is too small…,” the official said.

As per Section 7 of the RBI Act, Centre may, after consultation with the Governor, give directions to RBI as it may consider necessary in the public interest.