Though affected companies fret about how the Supreme Court verdict on coal blocks would hurt their finances, lenders say the decision would have only a limited impact on their difficult loans as the 46 operational mines hit by the cancellation of allocated blocks have been given time to wind up.
Banks say the level of non-performing assets — loans that do not yield returns — triggered by the verdict may not be significant as the six-month breather given by the court will help lenders decide their future course of action. Loans given to blocks that have not been producing any coal have already been taken into account by banks.
Companies impacted the by the court order have an estimated total loan book of Rs. 76,000 crore, a banking industry source said.
“Six months is a good enough period to put things in order and keep alternative plans ready… The ones, which have been cancelled, were in any case were not in operation for some time and the ones that have started production have got six months time, so the scenario does not change for banks immediately,” a public sector bank chairman told HT.
While State Bank of India has about 9% exposure towards the power sector, a key consumer of coal, according to estimates, IDBI Bank has an exposure of Rs. 2,000 crore. Bank of Baroda, ICICI Bank and HDFC Bank said they are still assessing the impact of the court’s order.