Canara Bank classifies Dabhol loan as NPA

Following the footsteps of State Bank of India and ICICI Bank, Canara Bank has classified its loan to Dabhol Power Company as a non-performing asset.

"We have also started treating this account as a NPA," Canara Bank chairman and managing director R V Shastri said after launching a relocated branch in Borivali on Wednesday.

The bank's exposure to DPC is Rs 390 crore (Rs 3.90 billion) and provisions have been made as per the required norms laid down by the Reserve Bank of India, he added.

Canara Bank's net NPAs were pegged at Rs 1,700 crore (Rs 17 billion) [four per cent] as on December end 2003, which have gone up from 3.59 per cent in March mainly because of the Dabhol project, he said.

Shastri said the bank, however, has made additional provisions of Rs 550 crore (Rs 5.50 billion) for its NPAs and expects them to remain at the same level in March 2004.

SBI had downgraded the Dabhol project to a sub-standard category of assets from a standard asset in the third quarter ended December 2003.

The bank's exposure was Rs 1,300 crore (Rs 13 billion) and it has so far provided Rs 300 crore (Rs 3 billion) towards this asset.

ICICI Bank, another lender, had classified in September 2003 the first phase of the project as a NPA.

The Industrial Development Bank of India had also stopped considering the Dabhol project as a standard asset.

Meanwhile, the consortium of Indian lenders and the United States government-promoted Overseas Private Investment Corporation are set to invite fresh bids for Enron Corporation's 65.15 per cent stake in DPC.

According to sources, new bids can be invited in February and the deal may get sealed by March end ahead of the general elections. The Centre is actively involved in the entire process, sources said.

"The Union finance ministry authorities are pushing to complete the bidding and sale process at the earliest," said sources in the lenders' consortium.

The entire process is subject to Indian lenders striking a deal with foreign counterparts regarding their debt exposure in the DPC project.

Sources claim that foreign lenders "are yet to make a counter offer on how much discounts they would like to offer on their exposure in DPC".

Earlier attempts to buy out foreign lenders' debt by Indian lenders had fallen through as offshore lenders were not agreeable for a substantial discount. The outstanding foreign debt on account of Phase I of the project is worth $90 million.