NEW DELHI: The power ministry has asked State Bank of India to tighten lending norms for distribution companies (discoms) as their continued borrowings amid ballooning dues to creditors and losses year after year pose a threat to the stability of the financial sector.
In a recent communication to SBI chairman Diensh Kumar Khara, power secretary Alok Kumar asked the country’s largest public sector lender to implement the additional prudential guidelines that make loans contingent upon fiscal discipline of state governments in respect to timely payment of subsidy or other dues to discoms.
The guidelines aim at making state governments accountable for subsidy or other freebies they announce, instill fiscal discipline and stop loans souring by switching off financial taps in case of wanton disregard of norms. PFC and REC, the sectoral lenders under the power ministry, have already implemented the norms.
