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Updated on: Wednesday, May 29, 2019, 11:01 PM IST

Banks stare at $38-bn power sector NPAs

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Mumbai : The banking sector, which is already reeling under a mammoth pile of bad loans, is looking at potential dud assets of $38 billion from the power sector, as $53 billion of the $178 billion bank loans to the sector are already stressed, said a report.

“Of the $178 billion (around Rs 11.7 lakh crore) of debt of the power sector, $53 billion (around Rs 3.5 lakh crore) are already under stress (primarily to the generation sector) and of this, as much as $38 billion (around Rs 2.5 lakh crore) have the potential of being written-off as bad loans,” the Bank of America-Merrill Lynch report said on Wednesday.

The report is based on the fact that as much as 71 gigawatt (gw) of private sector coal-based projects are facing bankruptcy filings at various NCLTs, implying probable resolution from June 2019 and it expects an average 75 per cent write-off in these loans.

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Of the $178 billion loan, the distribution companies have $65 billion, generation companies have $77 billion, and transmission firms have a debt burden of $36 billion, says the report penned by BofA-ML research analysts Amish Shah and Sriharsh Singh.

Of the $53 billion of stressed loans, as much as $50 billion are to the generation sector alone, says the report, adding loans to the distribution sector, which were earlier stressed, are now better off given quasi-state guarantees and restructuring under the government’s Ujwal Discom Assurance Yojana (Uday) scheme.

Of this $178 billion debt mountain, banks have the largest at 53 per cent of the total loans, followed by non-banking finance companies (NBFCs) at 35 per cent and the balance from the states.

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About 43 per cent of loans are extended to the power generation sector, followed by distribution at 37 per cent and transmission at 20 per cent, the report said.

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Published on: Thursday, April 05, 2018, 12:13 AM IST
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