Mumbai: The Reserve Bank of India (RBI) has asked banks not to treat Kingfisher Airlines’ brand as collateral since it is intangible. This is because the loan has turned non-performing for most of the banks.
The RBI’s rejection means lenders will have to treat their exposure to Kingfisher as unsecured, for which the provisioning requirement will go up substantially.
Loans to the airline have become non-performing for a host of banks, including State Bank of India, Punjab National Bank, Bank of Baroda, Bank of India and Central Bank of India, among others. Since the loan became sub-standard — the first category of NPA — banks had provided for 15 per cent of the loan value, assuming the asset was secured with the brand being treated as collateral.
According to bankers, the RBI has reminded them that for provisioning purposes, assets backed by intangible securities cannot be treated as secured. For unsecured assets, the provisioning requirement is 25 per cent in the sub-standard category.
26/09/12 Manojit Saha/Business Standard
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The RBI’s rejection means lenders will have to treat their exposure to Kingfisher as unsecured, for which the provisioning requirement will go up substantially.
Loans to the airline have become non-performing for a host of banks, including State Bank of India, Punjab National Bank, Bank of Baroda, Bank of India and Central Bank of India, among others. Since the loan became sub-standard — the first category of NPA — banks had provided for 15 per cent of the loan value, assuming the asset was secured with the brand being treated as collateral.
According to bankers, the RBI has reminded them that for provisioning purposes, assets backed by intangible securities cannot be treated as secured. For unsecured assets, the provisioning requirement is 25 per cent in the sub-standard category.
26/09/12 Manojit Saha/Business Standard
