Wednesday, October 24, 2018

Banks seek carriers’ revival plans, collateral for fresh funds

Mumbai/New Delhi: At a time when airlines are facing liquidity problems, banks are reluctant to extend fresh loans to aviation companies as some of them are already on the watchlist in the wake of signs of stress. Some of the top banks, including SBI, have asked airlines including Jet Airways to come out with concrete revival plans and enough collateral for fresh exposure, a banking source said. Another person, anonymously, said that Jet has sought moratorium from its lenders on its loans while seeking additional financing to meet its immediate capital requirements.

The Reserve Bank of India (RBI), which was earlier in favour of loan recast for airline firms has scrapped all loan recast schemes last year. If any borrower defaults, the banks will have come out with a resolution plan and bankruptcy proceedings. RBI’s February 12 circular on restructuring of bad loans had mandated banks to take loan accounts, which remain unresolved for over 180 days, to the National Company Law Tribunal.

After the Kingfisher Airlines episode and bankruptcy proceedings against many steel and textile firms, banks have turned cautious while lending to aviation and telecom sectors, the source said. SBI chairman Rajnish Kumar had earlier indicated that Jet Airways is in the watchlist of special mention accounts (SMA) 1 and 2. In SMA 1 accounts, loans are overdue for 31-60 days and in SMA-2, loans are overdue for 61 to 90 days. “When there are signs of stress, we ask for concrete revival plan and collateral. We asked IL&FS also but they were unable to come up with anything,” said an official of a PSU bank. Jet had made a Rs 1,363-crore loss in June quarter.
The decision to have Jet Airways’ loan repayments deferred comes at a time when the Naresh Goyal-promoted airline is working on various cost-reduction measures that include restructuring of its balance sheets and optimisation of its payrolls.
24/10/18 Indian Express

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