Public sector banks may end up taking a 60-70% haircut on loans given to power companies.
The Allahabad High Court on Monday refused to grant interim relief to power companies, which had filed pleas against the Reserve Bank of India (RBI) regulations on stressed assets, CNBC-TV18 reported. Public sector banks may end up taking a haircut of 60-70% on loans given to power companies.
The Reserve Bank of India (RBI), in its 12 February circular, tightened norms for settling bad debt by setting timelines for resolving non-performing assets (NPAs). It allowed lenders to initiate insolvency proceedings against defaulting companies. Although banks were given several options to arrive at a resolution plan, they had 180 days to do so. The central bank also introduced the concept of a one-day default under which banks have to identify incipient stress even when repayments are overdue by a day.
The Allahabad High Court had earlier ordered lenders to avoid acting against power producers after they sought relief against the RBI's new stress resolution norms. Also, in a relief to power producers, the Supreme Court had refused to stop Allahabad High Court from hearing these petitions.(Source : Mint).