Tuesday, November 20, 2018

Banks to go ahead with power units’ resolution plans

Sunday, September 16, 2018, 17:30
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Banks have decided to continue with their resolution plans for power plants without seeking any advice from the Reserve Bank of India. The decision follows a favourable legal advice in the interpretation of the Supreme Court’s September 11 interim order that directed status-quo on the matter.The banking regulator is also unlikely to come out with any clarification following the Supreme Court order, sources said.Banks sought legal advice on whether the Supreme Court order stalls the ongoing resolution process by the lenders. The order briefly said: “Status quo, as of today, shall be maintained in the meantime.”After initial apprehensions, law firms have finally interpreted the brief judgement as favourable to the resolution proceedings and interpreted status quo only on insolvency proceedings till November 14, the next hearing, an official with a top lending institution told ET, speaking on the condition of anonymity.“Almost all banks have decided to continue with their resolution proceedings. No bank is seeking clarification from RBI on this matter,” he said.The sources said RBI was unlikely to pronounce any direction on treatment of stressed assets till next court hearing. It would take a call on a case-by-case basis if a bank comes with an issue, said one of the people.The RBI didn’t respond until press time Sunday to ET’s request for comment.PFC chairman Rajeev Sharma last week said the worst was over for the lender in terms of provisioning for stressed assets, with most power plants fetching better-than-expected deals and at least eight of those set to be completed before the Supreme Court’s next hearing in mid-November.He said the company was in final stages of closing deals for at least eight projects such as GMR Chhattisgarh, KSK Mahanadi, RKM Powergen, RattanIndia Amravati and Nashik and Essar Mahan, totalling 15,000 mw of generation capacity.“We are hopeful to close quite a few deals that are closer to resolution as we have got more time to meet and discuss,” said an executive with another lender with a significant exposure to stressed power assets. “All the banks had sought opinion from legal departments or legal firms like Cyril Amardas Mangalchand or Dheer & Dheer. The lawyers have said that the status quo was ordered by the Supreme Court on just the insolvency proceedings and not on resolution plans.”Last week, the Association of Power Producers wrote to banks over the interpretation.“We understand from the information coming in from our members that some banks and FIs have expressed a doubt as to whether they can go ahead with resolution process already underway,” it said.The letter cited a September 11 ET article carrying RBI counsel Jayant Bhushan’s statement that the order stalled only the insolvency proceedings against the troubled projects.“The SC order does not impact the ongoing resolution process of stressed assets by lenders. What has been stopped is mandatory reference to NCLT of any stressed asset, resolution plan for which was not implemented on or before 27.08.2018. Therefore, the bankers are requested to utilise this time and finalise and implement the ongoing resolution process to save assets from value erosion post referral,” the association said.

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