The Reserve Bank of India is understood to have told the Allahabad High Court that it is not possible to relax its February 12 circular mandating one-day default trigger for resolution of stressed assets, exclusively for the power projects. Reiterating its earlier stance, lawyers representing the banking regulator argued on Thursday that the Insolvency and Bankruptcy Code, in its current form, already covers all eventualities and if the government feels it should use its power and issue directions directly to the RBI, sources aware of the development said. The RBI will submit its written submission to the court on Friday.
The said RBI circular requires banks to finalise a resolution plan in case of a default on large accounts of Rs 2,000 crore and above within 180 days (irrespective of sectors), failing which insolvency proceedings will have to be invoked against the defaulter and assets would be taken to the National Company Law Tribunal (NCLT). As many as 34 power plants, with a combined capacity of 39 GW, are identified as stressed assets.
The finance ministry, which recognised external factors that led to the crisis in the power sector, had cautioned the parliamentary committee on energy that sectors such as shipping, cement, and more particularly micro small and medium enterprises are also in trouble due to external factors, and similar demand for special dispensation could come from these industries as well. “So, should we have a separate sector-specific NPA resolution regime or an overarching regime?” Rajiv Kumar, secretary, department of financial services, asked the committee.
The latest report presented by the parliamentary committee on energy has observed that the February 12 circular of the RBI is “discriminatory in approach to the existing promoters”. In line with the stance taken by the power ministry, the committee recommended that the RBI should amend its guidelines to “make them amenable in an unbiased manner” to adequately address the sector-specific issues encountered by independent power producers, and salvage the electricity sector out of the ongoing stressed asset scenario.
The power ministry has requested for a minimum of a 90-day default time for any account to consider implementation of a resolution plan, as electricity distribution companies (discoms) usually delay paying power generators. As for assets identified under the Samadhan scheme (11 projects with combined capacity of 12,460 MW), the government asked for an extension of the reference date (for designing a resolution plan within 180 days) from March 1, 2018, to December 31, 2018. In the meantime, the government has set up a high-level empowered committee, headed by the Cabinet secretary, to find ways of preventing stressed power plants from becoming non-performing assets.