Friday, June 16, 2017

India’s banks could lose Rs 4,300 crores on bad loans to Kingfisher Airlines

Fourteen banks, 13 of which are public sector banks, stand to lose nearly Rs 4,300 crores on account of the loans they have advanced to the grounded Kingfisher Airlines. Of this amount, the State Bank of India, India’s largest bank and the biggest lender to the Kingfisher Airlines, expects to make a loss of over Rs 900 crore. This was revealed in an internal assessment prepared by a senior SBI official in December 2016. The assessment, which was not put out in the public domain, was recently shared with the Economic and Political Weekly by a whistle-blower.

The assessment of loss was prepared on December 7, 2016, by Govind Subbanna, chief general manager of the SBI’s Mumbai-based “mid corporate group” and submitted as a memorandum to the bank’s “Special Committee of the Board for Monitoring Large Value Frauds (Rs 5 crore and above)” for its meeting that was scheduled and held nearly two months later on February 17 this year.

Analysing various assets pledged by Kingfisher as security against loans, the memorandum concludes that not only does the market value of these assets amount to just Rs 1,565 crore, but the recoverable value works out to only Rs 1,071.64 crore against an exposure of around Rs 4,457 crore. The total loss to the SBI and the other banks is calculated as the difference between their individual exposures and their share in this recoverable value. SBI, which has the largest exposure to the KFA amounting to Rs 1,202 crore, declared the loan as a non-performing asset in 2011 and classified it as a “fraud” in September 2016. The memorandum pegs the bank’s recoverables at arund ₹200 crore. This assessment offers a first peek into the losses that Indian banks stand to incur on loans disbursed to the beleaguered airline, which was grounded in 2012 by India’s aviation regulator, the Directorate General of Civil Aviation.