RBI plan to tackle 12 stressed a/cs credit pos­i­tive for banks: Moody’s

Hindustan Times ST (Jaipur) - - World - Sahib Sharma sahib.s@livemint.com

EPC space across sec­tors. CDC has also be­come in­ter­ested in ac­quir­ing stressed power projects,” said the first per­son aware of the com­pany’s In­dia strat­egy, re­quest­ing anonymity. CDC’s in­ter­est comes at a time when the govern­ment is try­ing to ad­dress the prob­lem of stressed as­sets in the power sec­tor. JM Fi­nan­cial Re­search, in a March 8 note, wrote that its 2016 study of stressed power as­sets had con­cluded that of the to­tal 28 gi­gawatts (GW) gen­er­at­ing ca­pac­ity in ques­tion, as­sets ac­count­ing for 14GW were at high risk.

The sec­ond per­son, who also didn’t wish to be iden­ti­fied, said that Chi­nese firms have been try­ing to ex­plore op­por­tu­ni­ties in In­dia to drive growth.

China Har­bour En­gi­neer­ing is a unit of China Com­mu­ni­ca­tions Con­struc­tion Co. Ltd. Chi­nese firms’ in­ter­est stems from am­bi­tious plans such as Sa­gar­mala and Bharat­mala. While the to­tal road length to be de­vel­oped as ex­press­ways un­der Bharat­mala will be 51,000km, the Sa­gar­mala pro­gramme en­vis­ages con­struc­tion of new ports to har­ness the coun­try’s 7,517km coast­line and set­ting up as many as 142 cargo ter­mi­nals at ma­jor ports.

“China South­ern Power Grid has been look­ing to bid for power trans­mis­sion projects in In­dia,” said the first per­son.

Queries emailed to the Chi­nese em­bassy in New Delhi, China Com­mu­ni­ca­tions Con­struc­tion Co., China Datang and China South­ern Power Grid re­mained unan­swered.

Moody’s In­vestors Ser­vice on Mon­day said that the Re­serve Bank of In­dia’s (RBI) plans to re­solve 12 large stressed ac­counts, which ac­count for 25% of stressed as­sets, will be credit pos­i­tive for the banks as any mean­ing­ful res­o­lu­tion will im­prove their over­all as­set qual­ity. It will also set a prece­dent for re­solv­ing non-per­form­ing loans (NPLs) from smaller bor­row­ers.

Moody’s be­lieves that given the strict time­line un­der the In­sol­vency and Bank­ruptcy Code (IBC) of 180 days, which is fur­ther ex­tend­able to 270 days, af­ter which a com­pany will be liq­ui­dated, res­o­lu­tion process will get ac­cel­er­ate and help in loan re­cov­er­ies. How­ever, the strict time­lines may force some com­pa­nies into liq­ui­da­tion and may have a neg­a­tive ef­fect on banks, par­tic­u­larly in cases where lit­tle col­lat­eral is avail­able.

The In­dian bank­ing sec­tor is sit­ting on pile of ₹10 lakh crore worth of stressed as­sets of which gross bad loans ac­count for ₹7.7 lakh crore and the rest are re­struc­tured loans.

“We ex­pect that the di­rec­tive will neg­a­tively af­fect banks’ prof­itabil­ity over the next year if they need to take large write-downs rel­a­tive to their ex­ist­ing loan-loss re­serves for those as­sets,” the re­port noted.


The govern­ment plans to in­vest ₹3.96 lakh crore in the cur­rent fi­nan­cial year to fund its in­fra­struc­ture plans

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