Companies & Sectors
Power Ministry's Rs2 lakh crore CDR plan for discoms has banks worried

The Cabinet is likely to take up a proposal to recast about Rs2 lakh crore debt of the power distribution companies, whose precarious financials have raised concerns of default in the banking system

Mumbai: Corporate debt restructuring (CDR), which has already seen a five-fold jump in the first quarter of current fiscal, is set to break new records as the Centre is planning to recommend Rs2 lakh crore debt of state power utilities to the CDR cell, reports PTI.

In the just concluded quarter, the banking sector has seen the quantum of restructured loans rising over five-fold to Rs20,040 crore, up from Rs4,950 crore in the year ago period, sources at the CDR cell said.

According to the Union Power Ministry, the Cabinet is likely to take up a proposal to recast about Rs2 lakh crore debt of the power distribution companies, whose precarious financials have raised concerns of default in the banking system.

This comes over and above the Rs30,000 crore CDR that five state-run discoms of Tamil Nadu, Madhya Pradesh, Rajasthan, Punjab and Haryana had availed last fiscal.

A senior official of a city-based state-run bank expressed surprise at the move saying, "Any more CDRs will have serious repercussions on the banking system as it comes on the back of an already historic rise in CDR cases due to deepening slowdown in the economy."

Though he admitted that all CDR cases do not end up in losses for banks, as the historical average of CDRs turning up as losses is only 4-5% and 18-20% of them become non-performing assets (NPAs), he said the sheer rise in the CDR proposals is itself disconcerting.

"The rising number of NPAs and CDRs can impact our ratings, which are already under strain," an official of another state-run lender pointed out.

However, the country's largest lender State Bank of India Chairman Pratip Chaudhuri had last week defended the CDR mechanism as "a welcome platform" where the bankers can take a collective call to recover their money at a later date.

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Bankers seek pro-industry measures from RBI

Although the RBI has expressed concerns about the slow deposit and credit growth rates, given the high inflation, it may not go in for a rate cut on 31st July

Mumbai: Bankers on Monday sought pro-industry and liquidity easing measures from the Reserve Bank of India (RBI) as it prepares for the first quarter monetary policy review on 31st July, reports PTI.

"Though liquidity is comfortable as of now, we have sought some money supply measures and a pro-industry stance at the forthcoming monetary policy announcement considering the poor show by the economy in the recent months," Bank of India CMD Alok Kumar Misra, who is also the chairman of the Indian Banks Association (IBA), told reporters after the customary pre-policy meeting with the RBI.

"It could be a cut in the cash reserve ratio (CRR) or in the short-term lending rate (repo rate). Even China has cut its repo rates twice in one month," Misra said.

However, he parried a question on whether the RBI is in a mood to listen to the demand for a rate cut.

Misra said RBI has expressed concerns about the slow deposit and credit growth rates.

However, HDFC Bank MD and CEO Aditya Puri said that given high inflation (at 7.6% in May), he does not see any rate cuts on 31st July.

"A rate cut is not a panacea for all the pains of the economy. At the current inflation rate, I don't see any room for the central bank to cut interest rate. While the RBI can do something to ease money supply, the government should do everything to ease supply-side bottlenecks," Puri said.

SBI MD and CFO Diwakar Gupta said the bankers presented "their wish-list to the deputy governors", but did not elaborate.

However, Gupta and Misra said they discussed the rising stress levels in the system due to the increasing bad loans, but again they refused to divulge details on which are the sectors under stress.

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Siemens to supply vacuum de-gassing plant to Jailaxmi Casting

Siemens VAI Metals Technologies would set up the de-gassing plant at Jailaxmi Casting’s facility at Aurangabad that would be able to process around 1.1 lakh tonne of liquid steel every year

Mumbai: Germany-based Siemens has received an order to supply a 35 tonne vacuum de-gassing plant to Jailaxmi Casting and Alloys at its unit in Aurangabad, reports PTI.

No financial details were provided.

The contract has been awarded to the group's subsidiary Siemens VAI Metals Technologies for setting up the plant, which is expected to be commissioned by 2012-end, a company release said.

The new de-gassing plant will be able to process around 1.1 lakh tonne of liquid steel every year, it said.

"Siemens will design and supply the entire mechanical and electrical equipment for the vacuum de-gassing plant. This includes the vacuum tank, cover structure, including a simplified lifting device for the shop crane, the gas cooler and vacuum filter. The plant will be driven by a mechanical vacuum pump," the release said.

Jailaxmi Casting and Alloys, which runs a mini mill melt shop in Aurangabad, has been producing special and alloy billets and bars for the automotive industry and the regional construction industry.

"With the new vacuum de-gassing plant, Jailaxmi Casting and Alloys will further improve the quality of its crude steel in order to continue to reliably fulfil its customers' continually rising quality requirements," it said.

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