FinMin flays rating agencies for creating crisis of confidence

The government today took strong exception to reports by rating agencies on bank finance to the power sector and the downgrading of State Bank of India (SBI), saying such reports are "uncalled for" and "create a crisis of  confidence".

"How did they reach the figure of Rs 56,000 crore. I don't find reason for saying....These kinds of unsubstantiated reports create a crisis of confidence and which is something uncalled for," Department of Financial Services Secretary DK Mittal said.

Yesterday a Crisil report had said that Rs 56,000 crore loans given by banks and financial institutions to the power sector are potentially at risk.

Commenting on the report, Mittal said the Finance Ministry strongly objects to these kinds of reports at a time when economy is passing through a crucial phase.

"They are [Crisil top honchos] are coming to meet us tomorrow and we are going to take it up with them," he said.

All funding that has been done is supported by the government guarantees. So, does it mean questioning government guarantee? There are no loans without guarantees, he said, adding, "if there is a loan and there is a guarantee of the Government of India that is the sovereign guarantee."

Crisil in its report said the health of lenders to the power sector is under scrutiny, given the rising stress in the sector. "These lenders, including Indian banks, Power Finance Corporation, and Rural Electrification Corporation – have so far shown resilient performance, but urgently need strong policy actions to reform the sector, if they are to maintain their health," it had said.