Supreme Court relief aside, power sector loans a lesser drag on banks

Banks have already provided for 25-40% of the total Rs 2-trillion exposure to the power sector; ageing related provisioning could keep credit costs high

Calling the February 12, 2018, circular issued by the Reserve Bank of India (RBI) as ultra vires or legally invalid, the Supreme Court’s (SC’s) verdict on the battle between power, sugar, and shipping sectors and the RBI finally came to a decisive conclusion. It’s being seen as a big relief since stressed borrowers need no more rush into a resolution plan with their respective bankers.

Analysts at Elara Capital say this is a much-needed breather for power generation companies affected by the RBI norms on non-performing asset (NPA) recognition. “It will help companies under stressed assets to arrive at a