The revised RBI circular on stressed assets is a breather for stressed power producers and empowers banks to once again take decisions for themselves. However, no steps taken by the RBI can address the core issues of the power sector, according to the sector’s representatives.

“The revised RBI circular once again empowers the banks to take a call on what works best for them. The 30-day default window will also allow banks and borrowers to negotiate better terms for debt resolution of stressed assets,” Ashok Kumar Khurana, Director General at the Association of Power Producers (APP), told BusinessLine .

“For the power sector, the RBI circular is not the solution for the stressed assets. Before the elections, the Centre has taken certain decisions to resolve the factors causing stress in the sector. Till now, the approved solutions are on paper and now it’s time to implement them,” he said.

There are also other issues where a solution is yet to be finalised.

“A decision was not taken on many High-Level Empowered Committee recommendations, notably the mechanism to ensure timely payments from distribution utilities in view of the forthcoming elections. Those recommendations, too, need quick decisions and implementation,” said Khurana.

APP, along other associations and stressed thermal power plants, had opposed the February 12 RBI circular. The circular mandated banks to initiate insolvency proceedings against projects in the event of a single day of default in debt servicing.

This had added to the woes of stressed thermal power producers that were already struggling with coal and gas supply constraints, lower-than-expected power demand, and delayed payments from State government-controlled power distribution companies.

Related Topics