State-run Andhra Bank today said it is expecting credit offtake, which has been hovering around 7% so far this fiscal, to pick up in the current quarter as it expects the Reserve Bank of India (RBI) to ease monetary policy sooner than later.
"We expect a pick up in advances in the current quarter as we are expecting the Reserve Bank to soften its tight monetary stance soon. The overall year-on-year credit growth so far has been 21%," B A Prabhakar, who took over as Chairman and Managing director of the Hyderabad-based mid-sized lender on Monday, told PTI on phone today.
Prabhakar was appointed as the head of Andhra Bank on November 21 last year.
Asked whether his bank's exposure to the power sector, especially to the state-run utilities, has turned bad loans, he answered in the negative. Similar was his response to another query on the textile sector, which has an accumulated debt of over Rs 1 lakh crore.
However, Prabhakar said his bank's exposure has crossed the sectoral cap with nearly 20% of its advances being to state utilities. Last November the bank had said it stopped extending fresh advances to the power sector due to the same reason.
As of the September quarter, its advances to the power sector stood at Rs 17,693 crore, which is over 19% of its Rs 78,454 crore loan-book, the bank's Mumbai Zonal Manager P Nagendranathe Rao had said.
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Barring Rajasthan State Electricity Board, no other SEB had approached the lender for a debt restructuring. It has exposure to over half a dozen state-run utilities such as that of Andhra Pradesh, Tamil Nadu, Rajasthan, Maharashtra, Punjab, besides some private utilities, Rao had said.
Many state-run banks had recently asked SEBs to annually revise their tariffs steeply to reduce their mounting losses.
Banks are worried about their advances to the SEBs of Tamil Nadu, Rajasthan, UP, Bihar, Haryana, MP and Punjab, which according to the rating agency Crisil, are the most vulnerable ones.
A recent Crisil report said losses of discoms (distribution companies) rose 24% to Rs 27,500 crore between 2006-07 and 2009-10, which could rise to Rs 35,000-40,000 crore in 2010-11, mainly because of the problems the utilities are facing.
Recently, the second largest public sector lender Punjab National Bank, which had recast Rs 2,500 crore of loans in Q2, had said out of this amount as much as Rs 1,800 crore were from the Tamil Nadu SEB. The bank has an exposure of over Rs 12,000 crore to the sector.
Leading private lenders like ICICI Bank and Axis Bank are also reportedly going slow on the infra sector in general and the power in particular. Going by projections, discoms incurred a staggering loss of Rs 70,000 crore last fiscal.
Apart from poor financial health of SEBs, coal supply issues and environmental hurdles are hurting the power sector.
Against this backdrop, many lenders are treading very cautiously in extending loans to the sector, which is expected to see a capacity addition of nearly 1,00,000 MW in the 12th Plan (2012-17).