Central Bank to recast Rs 7,000-cr discom loans

Central Bank of India may restructure loans worth over Rs 7,000 crore of the state government owned power distribution companies in the fourth quarter.

The loans that would be recast will constitute to more than 60 per cent of the total loan exposure to state distribution companies or discoms. The bank has lent as much as Rs 12,000 crore to many of such entities. He, however, declined to name the utilities, which would come up for restructuring in the fourth quarter.

However, two such discoms, i,e Uttar Haryana Bijli Vitaran Nigam and the distribution company of Rajasthan have already kicked off a restructuring exercise of their loans.

Central Bank of India’s total exposure to power sector is about Rs 18,995 crore at end of December 2011. It forms about 14.24 per cent of total loan book.

Many banks, which mostly belong to the public sector, have been flooded with proposals of debt recast from discoms, which have been under financial stress. Discoms have been ailing for quite a few years due to lack of tariff increases, inability to deal with huge power thefts and state governments which have been very lax in paying the subsidies.

This forced many discoms across the country to raise short-term loans. Increased interest costs because of loans also added to these discoms’ losses.

Rating agency Crisil estimated the cumulative net losses of all distribution companies at Rs 35,000-40,000 crore for 2010-11. The bank’s net profit nosedived to Rs 113 crore in third quarter of 2011-12 from Rs 404 crore in the same period of 2010-11.

Higher provisions for non-performing assets and restructured assets led to dip in net profits. The provisions rose to Rs 486.36 crore from Rs 189.93 crore.

The total restructured assets of state-owned lender stood at Rs 9,324 crore at the end of December 2011.