Airline debt recast hinges on RBI cues

New Delhi: The debt restructuring of domestic carriers Kingfisher Airlines and Paramount could be delayed, as banks have decided to approach Reserve Bank of India for fresh sweeteners.
Bankers said that in response to an earlier request, RBI had allowed a second debt restructuring for aviation companies. But the package does not address the issue of provisioning — a key element to the plan.
Whenever the interest rate on a loan is reset or the tenure is extended to soften terms for a borrower, banks have to treat the arrangement as restructuring. This requires higher provisioning. Banks now want RBI to allow them to treat the restructured aviation loans as a standard asset, which requires lower provisioning.
They had cited the example of the real estate sector and the special dispensation given at the height of the financial crisis to argue their case.
04/10/10 Business Standard

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Categories: Kingfisher Oct 2010, Paramount Airways Oct 2010