Coal Block Verdict: Banks to Ask RBI for Recasting Loans, Says Financial Services Secretary

Mumbai: Acknowledging that the Supreme Court's order on mass cancellation of coal block licences may impact banks' asset quality, a top Finance Ministry official on Monday said the lenders will approach the Reserve Bank of India (RBI) for restructuring such assets.

"Some impact may be there, and what exactly it will be is being assessed. The banks will be talking to RBI so that they are given some kind of flexibility in restructuring those accounts...efforts will be made to avoid these accounts from becoming NPAs," Financial Services Secretary G S Sandhu said in Mumbai.

He was talking to reporters on the sidelines of the annual general meeting of Indo-American Chamber of Commerce. The Financial Services Department, which oversees functioning of all the 27 state-run banks - which control nearly three-fourths of banking system - is also talking to the coal and power ministries to ensure that the fuel supply alternatives are put in place, he said.

On the affected sectors, Mr Sandhu said banks have lent to power companies and steel plants which in turn have coal linkages with the cancelled coal mines.

Indian Banks Association, which represents lenders' managements, had discussed the matter at a meeting last week and hinted at seeking a "regulatory forbearance" in case there is impact on the asset quality from the affected accounts.

The Supreme Court on September 25 cancelled allocation of 214 coal blocks made since 1993, impacting at least 11 corporate groups like JSW Steel and Hindalco. Bankers point out that only 46 of these mines are operational and implications of the ruling will have to be studied.