The Reserve Bank of India (RBI) has backed the proposal of state-owned Rural Electrification Corporation (REC) to set up an Asset Reconstruction Company (ARC) to take over stressed assets in the power sector. The power sector is grappling with non-performing assets (NPAs) of about Rs 1.74 lakh crore.
The apex bank had said that it is open to plan of REC setting up an ARC. It noted that the proposal should be premised on a ‘level playing field’ agnostic of public/private ownership, and based on transparent price discovery. A panel was formed in compliance of the order of the Allahabad High Court. The High Court on May 31 stayed the February 12 RBI circular on companies other than willful defaulters and directed the finance ministry to hold a meeting of all stakeholders on resolutions.
Acting on the direction, a meeting chaired by the financial services secretary with all stakeholders was convened on June 22. On the basis of meeting, a report was prepared and sent to the power ministry for further action as per the court order. Besides, the report suggested setting up of a high level empowered committee (HLEC). In line with the report, the government constituted a high-level empowered panel under the cabinet secretary to resolve issues plaguing the power sector and revive stressed assets.