SL Bansal, CMD, Oriental Bank of Commerce, says that Government of India plans to push 50% of our loan which is on our books to the state government, of which 50% will be bonds that will be issued by the state government and the balance bonds will be issued via special vehicle which will be floated in the market.
From last two years, bankers have been sensitised by various sectors and bankers have put their foot down and have stopped funding the losses. Going forward, we will be funding only the viable projects.
Below is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying video.
Q: There is news that Rajasthan government could hike power tariffs where you have exposure in Rajasthan SEB. Will this move reduce your risk or it has already factored in? There is news that the Rajasthan government plans to convert loans into bonds, do you think there will be an additional restructuring to the ones that you have already restructured?
A: This is good for the banks, as now the state undertaking and state government are complying with restructuring proposals. There is news that Government of India plans to push 50% of our loan which is on our books to the state government, of which 50% will be bonds that will be issued by the state government and the balance bonds will be issued by a special vehicle which will be floated in the market.
Q: There is statement from the finance ministry that they don't want state governments to issue bonds, however, they say that they will back the bond issue by SEB. Does this statement make bonds a secure option?
A: We understand that Government of India will force state government to take 50% loans on their books. Of this total loan, the state government will issue 50% bonds subject to FRBM route. As some of the state government has already hit the limit, therefore, it is not possible for them to issue the bonds, they may issue in a year or two.
Till that time this asset will remain in our