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RBI skips meet on stressed power assets; SBI, PNB seek time for resolution

New Delhi :The first meeting of the high-powered committee (HPC) for resolving stress in the power sector did not see any attendance from the Reserve Bank of India (RBI) on Friday. Key lenders like State Bank of India (SBI) and Punjab National Bank (PNB), however, sought more time for resolution of 9,500 MW power assets that could see about 40-50 per cent haircuts on the outstanding amount.
The absence of an RBI representative in the crucial meeting has sent a strong signal that the central bank is in no mood to relax its deadline, set via a February 12 notification, on taking the defaulting companies to the insolvency court. “The RBI representative should have been present in the meeting if we have given them a place in the high-powered committee,” an official said.
The HPC is headed by Cabinet Secretary PK Sinha and has representations from the ministries of power, coal, railways and finance, and key public sector lenders. Though the committee was set up on July 29, the RBI was invited to be part of it after the Allahabad High Court’s order on Monday.
Officials said SBI would urge other lenders to approve its resolution plan for close to seven assets, including those of GMR, Jaiprakash Associates, and Coastal Energen. Lenders also told the committee that they were willing to take a haircut of 40-50 per cent on these stressed assets.
Officials said SBI would seek more time from the RBI for finalising the debt resolution plan and getting approval from all other lenders.
“Both PNB and SBI representatives apprised the committee that the debt resolution plan of these stressed assets has almost been finalised, and at least a month will be required for the transaction to take place,” a source said.
PNB Executive Director LV Prabhakhar and SBI Chairman Rajnish Kumar were present in the meeting, besides secretaries of various government departments.
SBI’s resolution plan is called Samadhan and it aims at taking over sustainable debt and thereafter selling the asset to some asset restructuring company. The bank has identified nine assets for the same.
The lenders also said the assets that have completion status below 50-60 per cent would be referred to the bankruptcy court directly. “It would be difficult to find resolution for these assets in such a tight deadline. Hence, they will land directly in the National Company Law Tribunal (NCLT),” said another official. There are more than 24 stressed power projects that are incomplete and will face insolvency proceedings. These projects might find it hard to get buyers.
An official said there was no discussion on utilising a legal provision that allowed the government to issue directions to the RBI since no central bank representative was present in the meeting. According to the Section 7 of the RBI Act, the central government may issue directions to the RBI as it may “consider necessary in public interest” after consultation with the RBI governor. The court had asked the Centre to take a decision on whether it wants to utilise this provision to give relief to the stressed power assets within 15 days.
Sources said the RBI’s presence was necessary given the resolution scheme of Rural Electrification Corporation (REC), Pariwartan, which aims at setting up an Asset Restructuring and Management Company (AR&MC), would need approvals and time relaxation from the RBI.
“Pariwartan is a framework and would be put to use even when a project lands in the bankruptcy court. The NCLT allows any framework to be used for resolution. We would look forward to use the model of Pariwartan for several assets, as and when required or asked for,” said a senior official of REC.