Reserve Bank of India Governor Raghuram Rajan is expected to ask the government for some clear interventions in the coal and road sector to stop the mounting of bad loans in the infrastructure sector with banks.
RBI has reason to be worried as the government plans to hold at least two major auctions within this fiscal for telecom spectrum and coal blocks.
But a clutch of leading public sector banks have informed the RBI they will not be able to lend to companies for these auctions since their infra lending has peaked.
The list includes State Bank of India, Bank of Baroda and others who informed Governor Rajan’s team about their problems in a meeting, last month.
The total exposure of the banking sector to the infrastructure sector is Rs 7,94,300 crore as on September 2013 (RBI data). The gross non-performing assets and restructured advances of public sector banks was almost 12 per cent (11.87) of their total loans.
The banks want some payments to come in from the power generation companies so that the level of their stiff exposure melts somewhat.
For the telecom auctions the banks will be expected to lay out about Rs 40,000 crore, while the sum for coal blocks is expected to be a bit lower.
Senior finance ministry officials have endorsed the concerns of the scheduled commercial banks that funds provided to many projects have hardened due to delays and court cases.
An informed source said RBI wants the finance ministry allow power producers with fuel supply agreements prior to 2009 to opt for buying some imported coal instead of their entire domestic quota. This will free up space for power producers coming in later to get domestic coal up to some extent and make them willing to begin repaying some of their outstanding loans to banks.
The RBI Governor had earlier as the chief economic adviser to the finance ministry suggested to the coal and power ministries to create similar incentives for thermal power plants.
Rajan’s proactive stand is different from the usual position taken by successive RBI governors who left the initiative in these matters to the government to sort out.
* Total bank exposure to the
infrastructure sector is R7,94,300 crore as on September 2013
* The gross NPA and restructured advances of public sector banks was 11.87% of their total loans
* For telecom auctions banks will be expected to lay out