Power Sector will Continue to Trouble Private Banks
Power sector stress contributes nearly 17% of the overall debt of banks; next round of fresh slippages may also emanate from the sector
ICICI bank, which has the highest exposure to the sector in absolute terms of about ₹ 45,000 crore, or 4.8% of its loan book, recorded an addition of ₹ 1,420 crore to its watch list from a power account classified below investment grade in the June quarter. With this slippage, the total outstanding exposure to power sector in the watch list stands at ₹ 7,076 crore, the highest for any industry.
ICICI Bank has acknowledged that given the stress in the steel and power sectors, slippages from investment grade to below investment grade cannot be completely ruled out.
The stress in the power sector has also reflected in the June quarter numbers of mid-sized private sector lender Yes Bank. While the bank has cut its power and electricity exposure to 10.6% in June from 11.3% in March and only 2% of its total exposure is non-operational, it has indicated that the stress in the sector is high and it will continue to adjust risk in the portfolio by steps like sell-down of loans.
10.6 5.2 4.8 3.5 14,837 25,621 45,235 4,074