Bankers fear airline loans may turn bad

Mumbai: Banks are concerned that the Rs 50,000 crore in loans given to airlines could turn bad. They have petitioned the Reserve Bank of India (RBI) to allow them to restructure the repayment of the principal.
The matter was raised when chief executives of select banks met RBI officials on Monday ahead of the April 20 money policy for 2010-11.
Bank sought a special dispensation for the loans to airlines. They wanted permission to extend the loan tenures more than twice without having to classify them as non-performing assets because the airlines, though unable to pay back the principal, were regular in paying interests.
A senior public sector banker said, “Most airlines are planning initial public offerings. When that happens, the loans will be considerably reduced.”
At the meeting, the other issues raised by banks related to interest rates, liquidity and asset quality. Banks told RBI that they would not raise lending rates immediately. “Some banks raised asset quality and liquidity concerns. They spoke about the pressure on margins as interest has now to be calculated daily in savings accounts. Deposit rates have also started rising with high inflation,” said MV Nair, chairman of the Indian Banks’ Association and chairman and managing director of Union Bank of India.
05/04/10 Manju AB/mydigitalfc.com

To Read the News in full at Source, Click the Headline

Categories: Indian Aviation- In General Apr 2010