The Ministry of Power (MoP) has urged banks to exercise caution while giving loans to state power distribution utilities to avoid putting the financial system at risk.
Reportedly, in November 2021, the government wrote to various financial institutions asking them to follow prudential checks introduced by Power Finance Corporation and REC Limited before sanctioning loans to state electricity distribution utilities. It is expected that restricted access to bank credit will push states to undertake reforms to make discoms viable. The outstanding subsidies to power discoms as on June 30, 2021 stood at Rs 718.65 billion while government department dues were at about Rs 520 billion.