SBI plans policy to lend to coal miners ahead of landmark auctions

Topics sbi | coal policy | coal mine

India’s coal-fired power plants, the biggest users of the fuel, operated at an average 46.2 per cent of their capacity during the three months ended June
State Bank of India is creating a policy to lend to coal miners before landmark auctions that would end decades of state monopoly on the fuel, according to a person with knowledge of the matter.

Long-term offtake contracts assuring demand will be central to any lending decision, the person said, asking not to be identified before terms are finalised. The nation’s biggest bank would prefer a loan tenor closer to five years, the person added.

The planned policy suggests SBI is open to providing some of the financing required to put 41 coal mines with a combined annual production capacity of 225 million tons into private hands. The giant bank has flagged concerns about the sector, and Indian banks are reining in loans to corporate borrowers as the coronavirus pandemic pressures asset quality.

Lenders are also wary about sustained demand for coal, which is seen globally as a dirty fuel but is still the biggest source for electricity generation in India. In Japan and Europe, several banks have announced plans to cut down lending to coal projects.

India’s coal-fired power plants, the biggest users of the fuel, operated at an average 46.2 per cent of their capacity during the three months ended June, compared with 63.2 per cent a year earlier.

State-run MSTC Ltd. will hold the final online auctions from October 19 to November 9, allowing private companies to mine and sell coal for the first time in nearly five decades.

A representative for SBI didn’t immediately reply to an email seeking comment.

The price at which the coal will be sold to potential buyers will also be important to appraise the viability of the loans, the person said, adding that SBI will determine a cap on how much exposure it will have to the sector.



Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel