Aviation loan revamp: RBI gives three options to banks

Mumbai: The Reserve Bank of India (RBI) has given three options, including a reduction in interest rates and conversion of loan into equity, to banks while dealing with the issue of restructuring of bad debts in the aviation sector. Some of the aviation loans have already become NPAs, bankers said here.
SBI chairman OP Bhatt said the first option is to maintain the status quo for the sector — which was prevailing during the last financial year ended March, 2010. The second one is to allow banks reduce interest rates while the third option is to convert some loans of the aviation sector into equities. “The restructuring of the aviation sector may be a combination of these three options. All the possibilities are there in the guidelines sent by the RBI,” Bhatt said. The banking system was allowed to restructure the loans to several sectors like steel and textiles seven years ago to tide over recession and project implementation woes.
RM Malla, CMD, IDBI Bank, said the banks have formed a consortium, which will soon meet to decide about the options to be exercised while restructuring the bad debts of aviation sector.
The entire banking industry’s exposure to the sector is at around Rs 55,000 crore out of which majority is lent to NACIL. SBI Capital has made its draft ready in the case of Kingfisher Airlines.
10/09/10 Indian Express

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Categories: Indian Aviation- In General Sep 2010