FinMin against banks restructuring 50% DISCOM loans

The Power Ministry is finalising the Cabinet note for debt restructuring of power DISCOMS and is likely to include the Finance Ministry's views on banks reducing exposure to them, reports CNBC-TV18’s Aakansha Sethi.

For banks which are already seeing a decline in asset quality and non-performing assets, this comes as good news. With an exposure of close to Rs 1.7 lakh crore, the Finance Ministry is not keen on banks restructuring 50% of their DISCOM loans. Instead, it has suggested setting up state financial corporations which will take up these bad loans. The Finance Ministry is also not in favour of state governments issuing bonds, and instead suggests power DISCOMS to issue bonds, because state government need to stick to their Fiscal Responsibility and Budget Management (FRBM) targets. At a time when state and central governments at under fiscal constraints, it is key that FRBM targets are met. On the other hand, the Finance Ministry is in favour of a three year interest moratorium. The Power Ministry is working on a Cabinet note to this effect, and is likely to draw from the BK Chaturvedi Committee report apart from the points on bank restructuring and bonds to be issued by state governments. This is likely to be taken by the Cabinet shortly, which is essential at this point in time for power DISCOMS. Watch the accompanying video for more details..