Mumbai: Lenders have rejected the debt recast package for Air India, dealing a big blow to its chances of a quick recovery and forcing its advisor SBI Caps to go back to the drawing board to chart a new plan to revive the beleaguered airline.
Banks attending a meeting in Mumbai on Tuesday told SBI Caps that they cannot accept the proposal in its current form as it forces them to set apart more money as provisioning, especially for preference shares.
Under the package, banks were supposed to subscribe to preference shares worth 7,408 crore. Provisioning refers to setting aside capital for risky assets.
The meeting also underscored the simmering tensions between SBI, the country's largest bank, and other lenders. Though the restructuring package was supposed to apply to all lenders, preference shares were not issued to SBI, leading to lower provisioning for the bank.
11/01/12 Sangita Mehta/Economic Times
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