Critical to resolve stressed power assets before November: Bankers

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26 Aug, 2025 12:21

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A solution before November is key to avoid any further losses related to distressed power assets, say worried bankers after the Supreme Court's order putting a stay on the resolution of these cases.

After a petition by power companies, the apex court on Tuesday ordered a status quo on the RBI's circular on resolving the cases within 180 days. The cases pertain to defaulting power company assets (including shipping, textile and sugar sector) worth about Rs 2 lakh crore in the country.

Now, the apex court has halted the insolvency proceedings until November.

“Naturally, every proceeding will stop now…For us, the assets are already NPAs (non-performing assets) and if the government brings out a solution before November, then it would make sense. Otherwise, it would be unnecessarily delaying the process. If the Pariwartan scheme helps, then it's good for all the stakeholders,” said the CEO of a public sector bank.

Pariwartan or Power Asset Revival Focused Warehousing & Revitalisation (Pariwartan) framework was one of the resolution mechanisms devised by Rural Electrification Corporation under the guidance of the Centre.

The scheme, which is yet to see light of the day, is expected to be supported by state-owned institutions to find buyers for stressed assets that do not find any takers. REC, along with key sector lenders, would manage them along with an operations and management partner - most likely NTPC - and sell them later.

Prior to the SC order, as many as 34 stressed power projects with a cumulative capacity of over 40,000 MW, were expected to line up for resolution at the insolvency courts as the 180-day deadline set by the RBI under the February 12 circular ended on August 27.

Arbitrary

“Insolvency and Bankruptcy Code (IBC) as a process was supposed to be independent. From a pure resolution perspective, I think this order seems arbitrary. If we want to focus on IBC, I don’t think this is the right thing to do,” said Tarun Bhatia, Head of South Asia and India, Kroll – a corporate investigations and risk consulting firm associated with some of the insolvency cases.

However, he also feels that power sector reforms have to be independent of IBC but we have “not seen anything development on the reforms front”.

“If say, a company's survival has impacts employment or national security then I think it can have a different lens to look at,” Bhatia added.

Another senior bank executive said: “Power projects need time to revive and there is no immediate value in these assets. But they have long term value and such delays destroy the asset value to a large extent…We also hope that withelections being around the corner, the decision making should not be delayed.”​

Also, there is a fear that a precedent has been set and other sectors could also seek exemption from IBC process.

“Conceptually, power, road, steel have potential interest from investors. Some of these assets require financial support. In my personal view, the assets have value, (but) there is a mismatch of timing,” Sunil Mehta, Chairman of Punjab National Bank, told Moneycontrol in a recent interview.

Mehta, who is also leading Project Sashakt to help resolve stressed assets outside insolvency, feels that demand for power will continue in India and most assets got into the stressed situation because of extraneous reasons.

“We need to come down to the sustainable debt, we may not have the sight of cash flows; but can we convert it into positive cashflows? I think, we can do it in 3-4 years. Investors need to take a deep dive in it. There needs to be certain time for the investors to do the due diligence,” Mehta said.