RBI disfavours aviation bailout

New Delhi: The Reserve Bank of India (RBI) today indicated that it was not in favour of providing a special dispensation for restructuring loans extended to all airlines. At a meeting convened by Finance Minister Pranab Mukhjeee to review the performance of public sector banks, some lenders, led by the State Bank of India, pitched for an industry-wide package on the ground that most civil aviation companies were under stress.
Banks want to restructure the loans and continue to treat them as a standard asset. Under normal circumstances, banks have to set aside a higher amount as provision for restructured assets during the first year. Since banks cannot seek a special dispensation for restructuring the loans of a company, they are pushing for an industry-wide package.
At least four bankers present in the meeting told Business Standard that RBI Deputy Governor Usha Thorat responded to their request by saying that banks could restructure the loans themselves as they were reporting good results.
The government, on its part, appeared to be in favour of the proposal from the lenders. “Banks are worried about non-performing assets (NPAs). Gross NPAs are about 3 per cent of the total assets, which is high. Most NPAs, as a proportion of total advances, are in aviation and not in agriculture,” said an official.
15/08/10 Vrishti Beniwal & Sidhartha/Business Standard

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Categories: Indian Aviation- In General Aug 2010