Friday, October 21, 2022

Under ECLGS, interest rates for loans to Indian airlines are virtually double that of banks: Govt officials

Domestic airlines like IndiGo, Vistara, Air India, GoFirst, and Akasa Air are availing of loans from banks and financial institutions at interest rates lower than what the government's Emergency Credit Line Guarantee Scheme (ECLGS) charges them, senior government officials have said.

"Most airlines, except SpiceJet and GoFirst, have not applied for loans under the ECLG scheme as they are getting better rates from the open market," a senior government official aware of the matter said.

He added that SpiceJet has been loaned around Rs 1,350 crore under the scheme, while GoFirst had received loans of around Rs 100 crore.

Another government official said that banks have released funds to airlines at interest rates of around 8-9 percent under the scheme.

"Interest rates under the ECLG scheme were capped at 9.25 percent for banks and financial institutions (FIs), and at 14 percent for non-banking financial institutions (NBFCs)," the government had said in a press release in June.

Moneycontrol has learned from banking sources and aviation officials that large airlines in India, including Air India, IndiGo, and Vistara, are getting bank loans at interest rates between 4.5-6.5 percent.

"Air India had taken two loans of Rs 10,000 crore and Rs 5,000 crore at interest rates of around 4.5-5.5 percent at the start of 2022 from the State Bank of India (SBI) and Bank of Baroda (BoB)," an industry insider, who asked not to be identified, told Moneycontrol.

Similarly, a lawyer working for a domestic bank said that IndiGo had taken loans at interest rates of around 5 percent in the past.

21/10/22 Yaruqullah Khan/Moneycontrol

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