SBI questions on AP Gov guarantees

SBI questions on AP Gov guarantees

Andhra Pradesh state government's AP Power Finance Corporation (APFCL) had applied to State Bank Of India for 3000 Crore term loan and responding to the application the national bank has questioned the veracity of the guarantees by AP state government. While the state government is trying to raise funds for its power sector after the renegotiation of Power Purchase Agreements (PPAs), the SBI questioning the veracity of the guarantees come as a big shocker.

SBI had shot off a letter (dated Sep 30, 2019) to APPFCL managing director seeking response on the veracity of the guarantee of AP government in the context of "each state government not honouring the commitments, promises made by the previous governments."

Meanwhile, AP finance special secretary and APPFCL MD KVV Satyanarayana has responded to SBI over its queries. He stated that the there is no single instance of default by AP after the new government is formed and also clarified that there is no single instance where the guarantees of previous government were withdrawn.

APPFCL MD reasoned that SBI's concerns could have been based on the 'D' rating from Crisil that was due to delay in the debt repayment by Telangana entities since APPFCL is yet to be divided between AP and Telangana even five years after the bifurcation.