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Lenders Fear Coal Block Cancellations May Spike NPA Pains

Bankers have expressed apprehension over the fallout of the recent Supreme Court decision to de-allocate as many as 214 coal blocks, saying it could increase the already high NPA levels of banks but added that as of now, there is no need to panic.
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Lenders Fear Coal Block Cancellations May Spike NPA Pains

Mumbai: Bankers have expressed apprehension over the fallout of the recent Supreme Court decision to de-allocate as many as 214 coal blocks, saying it could increase the already high NPA levels of banks but added that as of now, there is no need to panic.

"It could happen... I am not ruling it out, but again we are not pressing all the panic buttons. I don't think there is a case for that. We need to be little patient and watch where it goes," State Bank chairperson Arundhati Bhattacharya said in Mumbai after the customary post-policy media briefing on Tuesday.

SBI has exposure of over Rs 4,130 crore to some of the affected companies which have coal linkages with the cancelled coal blocks.



Chanda Kochhar, chief of the largest private sector lender ICICI Bank, which has not disclosed its exposure to the affected blocks, however, observed that it's too premature to be panicked about it and said that if the government comes out with a solution, it will actually allow the assets to keep operating.

"Right now, one has to feel comforted about the fact that there is a clear intent to not disrupt the process and there is a clear intent to say mines should work and within a period a solution should be found and we hope for that," Ms Kochhar said.

Last Wednesday, the Supreme Court de-allocated as many as 214 coal blocks allocated since 1993. Of which, 46 were operational for many years and 40 are about to be commissioned. It had spared only 4 blocks.

The court also imposed a levy of Rs 295 per tonne of coal extracted till now by all cancelled licensees which has to be paid by December 31 2014. The coal extracted between January 1, 2015 and March 31, 2015 will also attract a levy of Rs 295 per tonne.

Ms Bhattacharya said the groups may not be asked to shell out the entire surcharge at one go.

"Surely, the government is well aware that this is going to stress out the groups so they will also look at a solution where by it has to be given over a period of time," she said.

On the exposure of banking industry towards the affected coal blocks, Ms Bhattacharya said it would be very difficult to assess it now.

"It is not only the question of the allocated mines, it is also a question about how many of them are actually using that coal. Many of them may have mines allocated but still not in production and they are using e-auction coal or imported coal. So at the most what will happen is Rs 30-40 crore which they have put in mines will go away. It is very difficult to give a certain number," the SBI chief added.

To a query over whether there is a need for flexibility from the Reserve Bank of India (RBI), she said there is no need for additional flexibility.

"Flexibility is already there in the system. We can still restructure accounts and keep them standard if they are standard."

Financial Services Secretary G S Sandhu had on Monday said, "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."

When asked about the loan waiver in Andhra Pradesh and Telangna, Ms Bhattacharya said that in Telagana, she expects things to start getting rectified but in Andhra, there is still uncertainty on how things will pan out.



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