 "Day after Coalgate verdict: Rating agencies put banks, firms under scanner")
Rating agencies are reviewing the impact of the Supreme Court’s coal block allocation verdict on banks and other companies, even as the Indian Bank’s Association (IBA) has decided to take up the issue on a “priority basis” at a meeting here on Friday.
Rating agency CRISIL has said for metal companies owning operational blocks, profitability will be hit after 2014-15, as they will have to substitute captive coal with imported coal, four times more expensive. And, Coal India might not able to supply domestic coal to these companies due to its fuel supply agreements with the power sector, it added.
Vibha Batra, senior vice-president, Icra, said banks might be hit by the Supreme Court’s decision on coal blocks. The rating agency would review the asset quality of banks, in the light of the court’s verdict, she added.
Rating agencies have said the court’s verdict comes at a time when banks are settling into a “stable asset quality” regime, raising fears of asset quality slippage. Besides pressure on existing loans, some restructured assets, especially in power and iron & steel sectors, might be impacted, they said.
Two public sector bankers said it was likely the chief executives of banks would discuss in detail the impact of the court’s verdict on lenders’ exposures, as well as a course of action, at the IBA meeting. A general manager at a city-based public sector bank said banks might seek a special 6-12 month dispensation from the Reserve Bank of India so their exposure to the coal sector wasn’t classified as non-performing assets.
A senior State Bank of India (SBI) official said the bank had substantial exposure to Jindal Steel and Hindalco (both have to pay substantial amounts as penalties).
He said the two companies had the financial capability to meet obligations, adding the lender’s exposure was safe.
Meanwhile, SBI on Thursday said Coal Producers’ Association counsel K K Venugopal had told the Supreme Court owing to its exposure to the coal sector, SBI might record a loss of up to Rs 78,263 crore (7.9 per cent of its net worth in 2012-13).
But SBI clarified the figure hadn’t been furnished by the bank and its exposure to the affected companies was substantially lower. “SBI does not apprehend any major problem/difficulty in recovery of the dues,” it said.
Rating agency CRISIL has said for metal companies owning operational blocks, profitability will be hit after 2014-15, as they will have to substitute captive coal with imported coal, four times more expensive. And, Coal India might not able to supply domestic coal to these companies due to its fuel supply agreements with the power sector, it added.
Vibha Batra, senior vice-president, Icra, said banks might be hit by the Supreme Court’s decision on coal blocks. The rating agency would review the asset quality of banks, in the light of the court’s verdict, she added.
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Two public sector bankers said it was likely the chief executives of banks would discuss in detail the impact of the court’s verdict on lenders’ exposures, as well as a course of action, at the IBA meeting. A general manager at a city-based public sector bank said banks might seek a special 6-12 month dispensation from the Reserve Bank of India so their exposure to the coal sector wasn’t classified as non-performing assets.
A senior State Bank of India (SBI) official said the bank had substantial exposure to Jindal Steel and Hindalco (both have to pay substantial amounts as penalties).
He said the two companies had the financial capability to meet obligations, adding the lender’s exposure was safe.
Meanwhile, SBI on Thursday said Coal Producers’ Association counsel K K Venugopal had told the Supreme Court owing to its exposure to the coal sector, SBI might record a loss of up to Rs 78,263 crore (7.9 per cent of its net worth in 2012-13).
But SBI clarified the figure hadn’t been furnished by the bank and its exposure to the affected companies was substantially lower. “SBI does not apprehend any major problem/difficulty in recovery of the dues,” it said.