SEB losses holding back power sector reforms

The Financial Stability Report highlights the fault lines in the banking system with the most glaring being in the power sector. Though the power ministry has been credited for being one of the most efficient ministries in the Narendra Modi government, the sector continues to be in stress.


As per the report, a whopping Rs 53,000-crore exposure of Indian banks to seven state (SEBs) has a “very high probability” of turning into non-performing assets (NPAs) in the quarter ending September. These loans were restructured in 2012, with a three-year moratorium for the principal amount of Rs 43,000 crore. If distribution companies fail to pay interest and/or the principal by June 30 (90 days from the date the moratorium ended), these will turn into NPAs.


Just as the report was made public by the Reserve Bank of India (RBI), finance ministry officials and bankers concluded discussions on a second debt-restructuring package for the Rajasthan SEB. The Rajasthan SEB alone has outstanding short-term working capital loans to the tune of Rs 52,400 crore as of March 31, 2015, which is the highest exposure among SEBs.

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