New Delhi: The Reserve Bank of India has refused to be part of the cabinet secretary-led panel set up by the PMO in July to resolve issues of the stressed thermal power sector.
Officials said the RBI has formally communicated to the government that the matter is sub judice and that its well-known views on handling loan defaults have already been articulated on many forums in the past.
RBI kept away even as lenders and private companies expect the banking regulator to clarify on treatment of stressed assets till the next date of hearing on November 14 in Supreme Court, which has ordered a status quo until then.
Officials, however, said the government and the RBI can still discuss the issue. “The ministry of finance can communicate with the Reserve Bank of India, as and when required, on changes required in provisioning norms and IBC,” a government official said.
The committee met for the second time on Friday after its first meeting on August 31 and discussed measures to alleviate the sectoral stress to a large extent.
The terms of reference of the committee includes suggesting changes required in provisioning norms and obstacles in fuel supply, sale of electricity and payment problems that made many plants unviable.
A senior government official said the RBI was not informed about the second meeting of the high level committee. The Reserve Bank was invited to be a part of the committee based on observations of the Allahabad High Court. The court directed the ministry of power to invite a senior representative of the RBI, after consultation with the governor of RBI, as a member of the committee.
RBI’s participation was perceived in the committee as important as banks are seeking clarity on whether the Supreme Court order stalls the ongoing resolution process by the lenders.
The brief order said, “Status quo, as of today, shall be maintained in the meantime.”
“We understand from the information coming in from our members that some banks and financial institutions have expressed a doubt as to whether they can go ahead with resolution process already underway,” Association of Power Producers has written in a letter to the banks.
The letter quoted an ET article published on September 11 carrying RBI Counsel Jayant Bhushan’s statement that the order stalls only the insolvency proceedings against the troubled projects.
“The SC order does not impact in any way the ongoing resolution process of the stressed assets by lenders. What has been stopped is the mandatory reference to NCLT of any stressed asset, resolution plan for which was not implemented on or before 27.08.2018. Therefore the bankers are requested to utilise this time and finalise and implement the ongoing resolution process to save assets from value erosion post referral,” the association has demanded. The committee was directed by the Allahabad HC to submit areport in two months.
“The second meeting of the high-level empowered committee to address the issues of stressed thermal power plants was held. Senior officials from various ministries and major lenders attended the meeting and deliberated upon the issues related to resolutions of the stressed thermal power projects. The deliberations will continue further,” an official statement issued by the government said.
The proposed measures, as reported by ET, include auction of power supply contracts with attached coal supplies, easing norms to allow coal usage for short-term power contracts and putting in place a payment mechanism to help power projects recover dues in time from state electricity distribution companies.
Companies had moved courts after RBI refused extension of deadline for completing resolutions of stressed power plants.
While the Allahabad HC ruled in favour of RBI, the SC had on September 11 ordered status quo on the projects and transferred all cases on the circular to itself.