Reserve Bank for REC-promoted ARC for power sector stressed assets

The Reserve Bank has backed the idea of state-owned Rural Electrification Corporation's proposal to form an asset reconstruction company (ARC) dedicated to take over stressed assets in the power sector.

Sources said the RBI in its representations to a panel headed by Financial Services Secretary Rajiv Kumar had said that it is open to proposal of REC setting up an ARC.

The power sector is grappling with non-performing assets of about Rs 1.74 lakh crore.

The apex bank in its written submission said "it is open to considering the suggestion by REC that there could be an ARC specifically to take over the banks' stressed power assets".

The proposal should be premised on a level-playing field and based on transparent price discovery, it said.

The panel was formed in compliance of the order of the Allahabad High Court.

The High Court on May 31 stayed the February 12 RBI circular on companies other than willful defaulters and directed the finance ministry to hold a meeting of all stakeholders on resolutions.

Acting on the direction, a meeting chaired by the financial services secretary with all stakeholders was convened on June 22. On the basis of meeting, a report was prepared and sent to the power ministry for further action as per the court order.

Besides, the report suggested setting up of a high level empowered committee (HLEC). In line with the report, the government last week constituted a high-level empowered panel under the cabinet secretary to resolve and revive 34 stressed power projects.

The HLEC will have representatives from the ministries of railways, finance, power, coal and the lenders having major exposure to the power sector.