Power firms win court reprieve from RBI’s strict norm on NPAs

RBI's Circular?

Reserve Bank of India (RBI) circular mandating that an account be categorised as being in default if there was even a day’s delayin servicing debt.

In a circular dated February 12, the RBI directed banks to classify even one­ day delay in debt servicing as default and asked lenders to put a

resolution plan in place within 180 days of default for accounts where the exposure exceeds ₹2,000 crore.

Allahabad High Court

This would not be applicable to the power sector for the time being. The Court directed the finance ministry to hold meetings in June with power producers to hear their contention.

Association of Power Producers (APP)

If after due deliberations with developers, power and coal ministries... ministry of finance is able to draw a time-bound action plan to resolve the issues, RBI may consider the necessary exemptions based on action plan and suggestions of the ministry of finance.

Stressed assets in Power Sector

In the power sector, 34 projects with the capacity of more than 40,000 MW are classified as ‘stressed’, according to the Department of Financial Services. The power sector is not a free market, it’s a regulated market where fuel supply, PPAs, regulatory clearance, payments by discoms are determined by the government agencies. The new promoter will also have the same set of problems unless these issues are resolved.

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