The Union power ministry has asked State Bank of India (SBI) to follow strict prudential norms when it comes to lending to state-run power distribution companies (discoms), warning that unchecked lending to the financially-stressed entities can expose the bank’s loan assets to risks. In a letter to SBI chairman Dinesh Kumar Khara, power secretary Alok Kumar said that even if the loans to discoms are given against state government guarantees, the “present trend of increasing unpaid government dues and subsidy arrears will repayment of debt non-feasible in case of defaults”.
As on June-end, states had not cleared subsidies worth Rs 71,865 crore — meant for certain consumer categories (including households and farmers) but routed via the discoms. Also, government departments (civic bodies and other such institutions) owe Rs 52,059 crore to discoms. “The resulting cash gaps in discoms get funded as working capital from banks and FIs in most of the cases,” the letter, reviewed by FE, stated.
