Mumbai: Mid-size state lender Andhra Bank on Monday said it is not making any fresh advances to the crisis- hit power sector, as it already has almost reached the sectoral cap with nearly 20 percent of its advances being to state utilities. (Agencies)
"As of the September quarter, our advances to the power sector stood at Rs 17,693 crore, which is over 19 percent of our Rs 78,454 crore loan book. Considering the crisis in the industry, we have decided against making any fresh advances to the power sector," Andhra Bank Mumbai zonal manager P Nagendranathe Rao said here on Monday at a function to celebrate 88th foundation day.
However, Rao added that barring the Rajasthan Electricity Board, no other State Electricity Board (SEB) has approached the bank for a debt restructuring and informed that it has exposure to over half a dozen state-run utilities such as that of AP, TN, Rajasthan, Maharashtra, Punjab, among others.
It can be noted that recently many state-run banks reportedly asked SEBs to annually revise their tariffs to reduce their mounting losses and thus make their business model remain viable.
"SEBs have to increase their tariffs annually to pass on their increased cost to their end-users. Otherwise, the business model will be inviable," Dena Bank Executive Director AK Dutt had said last week, adding the revision should be around 20 percent annually.
Currently, banks are worried about the advances extended to the SEBs of Tamil Nadu, Rajasthan, UP, Bihar, Haryana, MP and Punjab, which according to the rating agency Crisil, are the most vulnerable ones.
A recent Crisil report said losses of power distribution companies rose 24 percent to Rs 27,500 crore between 2006-07 and 2009-10, which could rise to Rs 35,000-40,000 crore in
2010-11, mainly because of the problems the utilities are facing.
Recently, the second largest public sector lender Punjab National Bank, which had restructured Rs 2,500 crore of loans in Q2, had said out of this amount as much as Rs 1,800 crore were from the Tamil Nadu SEB. The bank has an exposure of over Rs 12,000 crore to the sector.
Leading private lenders like ICICI Bank and Axis Bank are also reportedly going slow on the infra sector in general and the power in particular.
Going by projections, power distribution companies (discoms) incurred a staggering loss of Rs 70,000 crore last fiscal.
Apart from poor financial health of SEBs, coal supply issues and environmental hurdles are hurting the power sector. Against this backdrop, many lenders are treading very cautiously in extending loans to the sector, which is expected to see a capacity addition of nearly 1,00,000 MW in the 12th Plan.
Mumbai: Mid-size state lender Andhra Bank on Monday said it is not making any fresh advances to the crisis- hit power sector, as it already has almost reached the sectoral cap with nearly 20 percent of its advances being to state utilities.