Tuesday, July 13, 2010

RBI wants debt recast for airlines

New Delhi: The Reserve Bank of India (RBI) has asked 13 of the country’s top banks to frame a common policy for restructuring debt at airlines to provide relief to the ailing sector.
The regulator has also censured banks for not following prudent norms before lending to airlines and putting themselves in a tight spot. It has recommended that banks take tangible securities as collateral for future loans instead of depending on promoter guarantees and brand value.
The move is likely to provide relief for the debt-laden companies and directly help the country’s three biggest carriers—Jet Airways (India) Ltd, Air India and Kingfisher Airlines Ltd—which together control 65% of domestic passenger traffic and have a combined debt of $13.5 billion (Rs63,045 crore).
RBI wants the banks to form consortiums for restructuring debt instead of providing one-time relief to individual companies, such as Kingfisher Airlines. The Vijay Mallya airline has sought the recast of Rs2,000 crore of debt through SBI Caps.
In an 18 June meeting with executives of the 13 banks, the central bank noted it would be “a moral hazard for RBI to give any regulatory forbearance for any specific company”, according to the minutes of the meeting reviewed by Mint.
13/07/10 Tarun Shukla/Live Mint
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