India banks to plan resolving $19 billion power sector debt on today

The meeting follows a 11 Sept. order by Supreme Court to temporarily halt a move to begin bankruptcy proceedings against delinquent power producers, stalling efforts by the RBI to clean up soured debt at the nation's banks

Mumbai/New Delhi: Lenders to India’s power industry are scheduled to meet on Thursday to discuss ways to resolve 1.4 trillion ($19.2 billion) of stressed assets that’s hobbling the sector, people with knowledge of the matter said.

The meeting will be hosted in New Delhi by Power Finance Corp., a state-owned firm that lends to the country’s electricity generators, according to the people, who asked not to be identified because the details aren’t public. Representatives from the finance and power ministries, and Rural Electrification Corp. are also expected to participate, one of the people said.

The meeting follows a Sept. 11 order by India’s top court to temporarily halt a move to begin bankruptcy proceedings against delinquent power producers, stalling efforts by the central bank to clean up soured debt at the nation’s banks. Asia’s third-largest economy is trying to clean up more than $210 billion in soured assets to boost lending and investment.

Power Finance Chairman Rajeev Sharma didn’t answer calls and a text message on his mobile phone seeking comments.

The two-judge bench headed by Rohinton F. Nariman asked banks to maintain status quo and not file insolvency cases until further notice. After the apex court verdict, lenders decided to continue with resolution plans of power of at least seven assets, the people said.

The decision is the latest in a tussle between power project developers, lenders and the Reserve Bank of India, which earlier this year introduced new rules forcing lenders to declare a loan delinquent if it was even one day overdue. Under those directives, lenders had until Aug. 27 to recast certain delinquent loans and a further 15 days to refer the cases under the nation’s bankruptcy law.

Thirty-four stressed assets covering about 1.8 trillion had been identified in the coal-fired power sector, according to estimates in a government report and from State Bank of India. Fourteen of these, worth 55000 crore, have already been referred to insolvency court, while difficulties in eight more with 35,000 crore of dues have been resolved, State Bank Managing Director Arijit Basu said last month.

Delinquent power units include Jaiprakash Power Ventures Ltd.’s Bara project, KSK Mahanadi Akaltara and Avantha Power Jhabua, people familiar with the matter said earlier this month.