Banks turn cautious on power sector loans

Going forward,well be cautious on lending to the power sector. As of now,theres no problem in power sector loans

With the health of the power sector under scrutiny,Indian banks have turned cautious in extending fresh loans to the sector. The chiefs of commercial banks said they are closely monitoring the power sector loans and fresh loans may not come through that easily in the near future.

Going forward,well be cautious on lending to the power sector. As of now,theres no problem in power sector loans. Currently,therere no NPAs… but well be careful while extending loans to the sector. Were closely monitoring the situation, M Narendra,chairman and MD of Indian Overseas Bank,told The Indian Express. When asked whether banks have stopped lending to the power sector,Central Bank of India chairman and MD Mohan V Tanksale said,We have very less exposure on the power sector. We have not stopped any loan to the corporates in that sector,rather we are very cautious about it. I do not think the bank will experience any NPA in the future with the existing power companies.

We dont have much exposure to the power sector. Were not lending to the sector, said former Dena Bank chairman DL Rawal,who retired on October 31. While we are monitoring each project in power sector closely,we have had no slippages,we are not overly worried. We are comfortable about the quality of projects that we have selected in the power sector, ICICI MD & CEO Chanda Kochhar had said earlier this week. I dont expect any great improvement but I dont expect any shock to NPAs as well, she said. ICICI is one of the leading lenders to the power sector.

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According to the RBI,total outstanding loans to the power sector by Indian banks alone work out to Rs 3,00,752 crore during the 12-month period ended September 2011. This shows a decline in growth to 32.2 per cent from 46.9 per cent in the previous year.

According to a Crisil study,lenders including Indian banks,Power Finance Corporation and Rural Electrification Corporation have so far shown resilient performance,but urgently need strong policy actions to reform the sector. Around Rs 56,000 crore of these lenders exposure (comprising 12 per cent of their total power sector advances of Rs 4,80,000 crore as at March 2011) is potentially at risk, it said.

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