Government's Coal Supply Alternative to Plants Key for Lenders: IBA

Lenders will not be adversely affected if government delivers on its commitment on finding an alternative to ensure coal supply to power and steel plants, Indian Banks Association said today.

"Bankers will certainly feel heat of it (the Supreme Court order yesterday on coal blocks), but if the government is in a position to see that whatever productive capacity is put to use right now, and that much production is happening, I think
our job is done," IBA CEO M V Tanksale said.

He said banks from both public and private sector have an exposure to the 11 corporates impacted by the Supreme Court's order yesterday to de-allocate 214 coal blocks for illegalities in the allocation over the past two decades.

Tanksale declined to share the exposure of the banks to such corporates but said that IBA's management committee will be discussing the fallout of the apex court order at its routine meeting scheduled for tomorrow.

"Tomorrow, we have got out regular management committee (meeting). Of course, all industry-related issues get discussed (at the meeting)," he said.

According to reports, the banks have an exposure of nearly Rs 1 lakh crore to the affected entities.

"Government has said that they will somehow ensure that the coal supply is made available so that productive capacity of the power plants or the steel plants will not get impacted. If government can ensure that by any other mode, we are comfortable," Tanksale said.

He acknowledged that because of a decision like this, there will be a cascading effect on the power sector starting from generation, transmission and distribution, while the steel plants will also get impacted due to the lack of fuel.

Meanwhile, on his expectation from the September 30 policy review, Tanksale said he expects a status quo from the RBI given Governor Raghuram Rajan's recent pronouncements on the need to control inflation.

When asked if the expected status quo may be complemented by any other measure like a cut in the mandatory government bond holding requirement, Tanksale said there is no need for a SLR (statutory liquidity ratio) cut as the credit pick up is slow and there is no urgent need of liquidity.