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Home News Power Sector News Power sector loans at risk: PSBs begin restructuring

Power sector loans at risk: PSBs begin restructuring

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DebtPublic sector banks have nearly Rs 1-lakh crore exposure to state electricity distribution companies. And, with many of these companies almost on the verge of default, public sector banks now seem to have no choice but to begin restructuring their loans.  Debt-ridden state electricity distribution companies are trying to stave off a financial power cut. Many are asking banks to restructure their loans by extending the repayment period.

Punjab National Bank was the first to restructure loans worth Rs 1,700 crore given to Tamil Nadu state electricity board in the second quarter. The bank said this will prevent any immediate defaults by these companies.

Its chairman and managing director KR Kamath said, "Wherever we had issues on state electricity board short-term loans we have restructured and converted them into long-term loans repayable over a period of time and these installments are coming very regularly to us now." 

Not just PNB, other banks like Central Bank of India , are also looking to restructure loans given to state distribution companies. The bank says it has received requests from Rajasthan state distribution companies to restructure loans worth Rs 4,800 crore which is nearly half of its Rs 12,000 crore exposure to the sector.

"Almost 70% of our portfolio is on long term and whatever is there in the short term in any case, I'll have to take a call to convert it into long term," Mohan Tanksale, CMD, Central Bank of India said.

For now, banks have no choice but to restructure existing loans to prevent this huge exposure from turning into non-performing assets. But with the Reserve Bank (RBI) and the central government asking them to pause any fresh lending to state distribution companies, PSU banks seem to be losing out at both ends.

Source- Money control


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