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SBI questions credibility of AP Govt’s guarantees

The State Bank of India (SBI) has questioned the veracity of guarantees the Y.S. Jaganmohan Reddy-led Andhra Pradesh government has offered to raise funds for its power sector after the post-election renegotiation of several purchase deals cleared by his predecessor N Chandrababu Naidu. 

In a letter dated September 30th, the SBI management raised concerns about the state’s rising outstanding debt and sovereign guarantees. The bank was responding to an application for a Rs. 3,000-crore term loan by the Andhra Pradesh Power Finance Corporation (APPFCL). 

In its letter, SBI sought the response of the APPFCL managing director on the “veracity of the guarantee of the government of AP in the context of each succeeding state government not honouring the commitments made by the previous governments”. 
Andhra Pradesh special secretary (finance) and MD of APPFCL, KVV Satyanarayana, said the state government has responded to SBI in detail. 

State in self-defence mode

Satyanarayana said the state government has written to SBI, seeking to allay the bank’s concerns over repayment capabilities and sovereign guarantees, including those offered by the previous regime. 

He said SBI’s concerns appear to have largely been based on the ‘D’ rating from Crisil, which was due to debt repayment delays by Telangana entities since APPFCL is yet to be divided between the two states even five years after the bifurcation. 

“Several corporations of Andhra had raised funds from various agencies and there is not a single instance of default after the new government was formed. Neither any of the guarantees given by the previous government was withdrawn,” Satyanarayana said. 

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