Banks refuse to restructure aviation loans

New Delhi: Banks have refused to restructure loans of airlines, estimated at over Rs 50,000 crore, via the CDR (corporate debt restructuring) mechanism, senior bankers familiar with the matter said. One of the main hurdles is that 75% of the lenders to a particular borrower have to come together to trigger the CDR mechanism, one of the bankers said.
Indian Banks Association now plans to approach the RBI to allow banks reschedule loans of airlines — such as Kingfisher Airlines, Paramount Airways and Air India — without treating them as bad assets.
“I can tell you upfront that it would not be a CDR because it has other implications. So, none of the airlines will be going through the CDR route. What has been taken up to the Reserve Bank is that those airlines loans should be allowed to be restructured in such a way that loans continue to be treated as performing or standard asset,” said a senior State Bank of India (SBI) executive.
SBI has an exposure of Rs 3,500 crore to the aviation sector. The RBI has told banks that it could consider restructuring of the debt for aviation sector and not for any particular company. SBI chairman OP Bhatt said on Thursday that restructuring would help airlines raise fresh equity.
14/08/10 Nirbhay Kumar, Sunny Verma/Financial Express

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Categories: Indian Aviation- In General Aug 2010