Power Ministry asks banks to be more cautious in lending to discoms: Report

The power ministry has asked banks to be cautious when giving loans to state power distribution utilities. The Centre has issued a warning to banks for the first time owing to the adverse impact it could have on the financial system.

As per a report by the Economic Times, Union power secretary Alok Kumar wrote to various financial institutions last month asking them to follow prudential checks introduced by Power Finance Corp (PFC) and REC Ltd before sanctioning loans to state electricity distribution utilities.

In the letter he stated, “A burgeoning debt and outstanding payables of distribution companies to their creditors, predominantly gencos and transcos, is a matter of concern.”