Banks may get to bail out airlines

New Delhi: The banking regulator has said that banks could change the terms under which they have lent to airlines, possibly throwing a lifeline to a sector where most companies are in the red. The Reserve Bank of India has told the finance ministry that banks would have to devise debt restructuring packages for each airline and work as a group.
A letter from RBI deputy governor Usha Thorat to secretary financial services R Gopalan, which has been seen by ET, says that the central bank is willing to extend ‘appropriate regulatory concessions’ for the aviation sector provided banks come together as a consortium for air-line companies experiencing difficulty in repaying their loans.
The regulatory concession that banks are seeking is that they should be allowed to restructure or change the terms of their loans to airline companies without classifying them as non-performing assets, or NPAs. If assets become NPAs then banks have to set aside more capital, a process known as provisioning.
26/08/10 Rohini Singh & Dheeraj Tiwari/Economic Times

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Categories: Indian Aviation- In General Aug 2010