The Hindu Business Line : State Bank not to book accrued interest on Dabhol project loans

Besides, the country's largest commercial bank, which has an exposure of more than Rs 1,000 crore in the 2184-MW power project, would also make a prudential provision of a little over Rs 100 crore for the asset classified "project under implementation", a top SBI official said.

The Reserve Bank of India recently allowed banks to book accrued interest on projects under implementation. The relaxation would help banks record income from projects that have overrun their completion schedule but have no actual revenue flow. SBI has the third-largest exposure, including guarantees, to DPC after lead lender IDBI and ICICI, in that order. Bankers said that troubled DPC is the "largest project under implementation" in the country.

SBI's prudential measure, to not allow the jinxed project to blot its balance sheet in what is expected to be a good year, coincides with the foreign lenders to the project beginning international arbitration against their Indian counterparts, including SBI. Indian lenders are in the process of replying to the foreign creditors' arbitration notice.

According to a top executive of one of the domestic lending institutions, the tug of war between the Indian banks and financial institutions, led by IDBI and the foreign banks, including ABN Amro, Citibank and Bank of America is likely to drag on. "The foreigners do not want to remain in the project. They want to quit with as little damage as possible, while the Indian lenders want to revive the project as that is their only hope of recovering even a bit of the more than Rs 5,000 crore sunk in," he said.

Meanwhile, the Union Power Ministry is understood to have called a meeting of various domestic stakeholders (lenders and State officials) this week to discuss restarting 658 MW, phase-I of the unfinished plant. Early this month, the Mumbai High Court asked its receiver to prepare a report within three months on the feasibility of restarting the plant. The HC direction came on hearing a petition from IDBI to stop foreign lenders from terminating their agreement and forcibly transferring the assets to the State electricity board.

However, bankers are sceptical that much headway could be made without support of the equipment suppliers GE and Bechtel and foreign lenders whose concurrence and help is necessary to begin generation. A senior banker said, "it is difficult to restart the project with help from even NTPC because of proprietary technology involved. Restarting would be tough without at least GE, if not both (GE and Bechtel). Besides, foreign lenders have to give their no-objection as per the inter-creditor pact".

Lenders estimate that interest cost on aggregate debt financing accrues at the rate of approximately Rs 2 crore per day and put monthly revenue loss at about Rs 100 crore.

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State Bank not to book accrued interest on Dabhol project loans