Independent power producers have urged the Reserve Bank of India (RBI) to extend the last date for finalising resolution plans for defaulting projects to November 16 from August 27, as the central bank itself delayed releasing the list of authorised credit rating agencies, an indispensable part of the process. Following the RBI’s February 12 circular, as many as 34 stressed power plants worth `2.5 lakh crore, with a combined capacity of 39 GW, are expected to come up with resolution plans by end-August, failing which insolvency proceedings will have to be invoked against these assets.
The February 12 circular stipulates a one-day default rule on term loans, which mandates treating a borrower who misses repayments as a defaulter the very next day. It requires banks to finalise a resolution plan in case of a default on large accounts of `2,000 crore or more within 180 days, irrespective of sectors. While the reference date for identifying such defaults is mandated to begin from March 1, a letter sent by the Association of Power Producers addressed to RBI governor Urjit Patel pointed out that the list of authorised credit rating agencies was released by RBI only on May 21, effectively reducing the time available to implementing resolution plan by 82 days.
The February 12 circular stipulates that resolution plans would require independent evaluation by credit rating agencies. The aforementioned letter has been seen by FE. The rating agencies approved by the RBI for credit evaluation are Brickwork Ratings India, CARE Ratings, CRISIL, ICRA, India Ratings and SMERA Ratings. While private power producers and the power ministry want the timeline for designing resolution plans to be extended to 360 days instead of 180 days, the RBI has maintained that it is not possible to relax its February 12 circular exclusively for the power projects.
In an ongoing case on the issue in the Allahabad High Court, the RBI has said if the government feels, it should use its power and issue directions directly to the central bank. A parliamentary panel, and to some extent, the finance ministry have put pressure on the RBI to relax its circular. The central bank has cited preferential treatment to state-owned power utilities like NTPC as one of the reasons behind the stress in the power sector. The RBI is also understood to have raised the issue of the Allahabad HC’s jurisdiction in regard. It wants all similar cases pending before high courts of Delhi, Allahabad and Madras to be transferred to the SC.