Why banking crisis is really a power crisis
2 August 2018: The government seems committed to dropping great ideas for dealing with the country's banking crisis and boosting bad ones. Possibly that shouldn't be surprising, given that the administrators don't yet seem to have engaged with the real nature of the problem.
The advanced disturbing plan for dispensing with the poor loans balancing down India's state-owned banks, which control more than two-thirds of deposits, is to produce a "bad bank" - an asset-management group that would take picking up 15 percent of an agreed-upon floor price. This is the actual issue. The difficulty isn't that they don't have sufficient money, it's that not just of the stressed assets being put on business look good enough to buy.
The most dangerous bad loans, the bad bank is meant to deal with, are accumulated in one sector: power. In particular, Indian thermic plants are fighting. A parliamentary subcommittee concluded earlier this year that 34,000 megawatts-worth of capacity is in trouble. Unless nobody has presented up to gain potential from these plants, providing them valuable, or they don't have a way to subsidized coal. Others have provided even higher estimates. In many countries, examiners are starting to wonder if "stranded assets" in the singular, thermal capacity left behind in the shift to renewables or to more effective creation -- approach to building systemic pressure for the commercial system.
One decision suggests that European company societies simply, including grant funds, have more than 1 trillion euros of exposure to fossil-fuel groups and projects, and even a smooth transition to a low-carbon prosperity might include losses of 400 billion euros. Worse, it isn't always certain who'sIn extension, countrified power utilities are chronically in the red because of their inability to force end-users of electricity to pay up. Also if they develop, and more and more Indians get access to electricity, a decent proportion of the expenditure in the area is going to go into renewables or clean coal. Those stressed assets that have been -- or are likely to be -- restored seem to be in sectors like steel. Given that this transition is real and happening, policymakers around the world must understand that carbon-based assets are an economic time-bomb. It's time for controls to get serious about the knock-on effects of the world's fight against environmental change.