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Indian banks could be affected by coalgate: SBI offical

Posted on Sep 14, 11:01PM | IANS

The coal block allocation controversy may not have a direct link to banks, but a senior official of state-run State Bank of India Friday said the banks may be affected due to an indirect link of the lenders to power companies.

"Till now nothing has been held up because of the coal block issue. It is an indirect linkage for the banks because it goes and affects power plants," said SBI managing director Diwakar Gupta.

Gupta, however, hoped that the matter will be resolved in three to six months.

The SBI official said an investment of around Rs 2.5 lakh crore has been pumped in for 50,000 megawatt worth power generating projects now under various phases of implementation.

He said while the promoters' involvement would be around Rs.50,000 crore to Rs.75,000 crore, the remaining funding would be in the region of Rs.175,000 crore.

But he said though it was a large amount, "that does not mean the entire money will be under stress".

He was speaking at a banking colloquium organised by the Confederation of Indian Industry.

Turning to his bank, Gupta said it has around Rs.50,000 crore exposure to the power sector and is conducting regular stress tests of the assets.

He said the vertical heads of the bank's mid corporate group and corporate account group were reviewing the situation continuously.

Gupta said SBI was not apprehensive of its non-performing assets going up following the coalgate controversy.

"If they get cancelled, that will not be for an indefinite period. There are reasons to believe that the government is aware of the criticality of the issue and they will sort it out within good time," he said.

Corporation Bank chairman and managing director Ajai Kumar said the bank's balance sheets will be affected as a result of the companies' linkage to coal blocks.

He said the bank's balance sheets would come under pressure if the projects get stranded. In that scenario the non-performing assets would increase.

The bank was planning to conduct a stress test of its assets in the wake of the coalgate issue, he said.