Small lenders to submit report on stressed power assets by October 10

Small lenders will submit their resolution plans on stressed power assets to a group of bankers and assess the situation on October 10, Financial Express reported quoting people aware of the development.

The move comes after the Supreme Court asked banks to maintain status quo and not initiate insolvency proceedings against loan defaulting power companies in the country. The decision provided a temporary respite to 34 stressed coal-based projects with a combined capacity of about 39 GW and banks’ exposure of Rs 1.75 lakh crore.

According to Power Finance Corporation (PFC) the Supreme Court's decision would save seven PFC-funded coal-based power projects with generation capacities of 10,190 MW from going to the National Company Law Tribunal (NCLT).

A number of resolution plans for stressed assets are stuck at advanced stages because a fraction of small lenders in the consortiums are not agreeing to the plans submitted by major lenders, the report said.

If the small lenders give their consent, it would pave way for the resolution of stressed power assets. The bankers met on September 18 in the headquarters of the Power Finance Corporation (PFC) to discuss the issue. The representatives from State Bank of India and Punjab National Bank were present in the meeting.

Major financial institutions who are the leading lenders to stressed power projects include State Bank of India, Axis Bank, ICICI Bank, IDFC, IDBI Bank and PNB.

The government has also formed a committee, chaired by Cabinet secretary PK Sinha, to deal with stressed power assets. The committee has deliberated on irregular payments from discoms to independent power producers, possible changes in fuel allocation policies and ways of making discoms comply with terms of power purchase agreements.