Coal: Banks with Rs 1 lakh cr loans sitting on mine of worries

The mass cancellation of coal blocks by the Supreme Court has sent banks in a jittery mode as they have extended over Rs 1 lakh crore loans to power plants that were fed by these mines.

Almost all banks including country's largest lender State Bank of India and private sector ICICI Bank have lent to power plants that were put up based on coal from 214 coal blocks alloted since 1993.

While none of the bankers were willing to go on record on the impact of the Supreme Court ruling, sources said the lenders were assessing their exposure to the cancelled mines.

"We are glad that this is over with the SC verdict on coal blocks allocation. We now look forward for a quick plan of action for ensuring that coal supplies are not disrupted and thereafter a swift and transparent bidding process for reallocation," SBI Chairperson Arundhati Bhattacharya said.

Earlier this month she had said: "for SBI, the exposure is only around Rs 4,000 crore (Rs 40 billion), most of which are lent to power units which have fuel linkages with the affected coal blocks."

According to estimates, another public sector lender IDBI Bank has an exposure of Rs 2,000 crore (Rs 20 billion).

Commenting on Supreme Court judgement, Yes Bank Managing Director Rana Kapoor said the exposure of his bank is minimal. "As the the court has said that coal supply would be maintained to the power plants, therefore there would not be too much of an adverse impact on banks," he said.

Risks of banks are well diversified and fairly well spread, he added. Bank of Baroda Executive Director Rajan Dhawan said the bank is still making assessment of the exposure to the coal blocks.

ICICI Bank and HDFC Bank when contacted said they are still assessing the impact of the judgement.

A bench, headed by Chief Justice R M Lodha, quashed allocation of 214 out of 218 coal blocks which were alloted to various companies since 1993. The four blocks saved from cancellations are one each to NTPC and SAIL and two mines allocated to Ultra Mega Power Projects.

The bench, also comprising justices Madan B Lokur and Kurian Joseph, granted six months breathing time to mining companies to wind up their operations in the coal blocks.