Banks have increased lending to airlines, betting on the growth of domestic air travel in the long term.
Outstanding gross bank credit to aviation climbed 41 percent to Rs 31,628 crore on May 19 from Rs 22,318 crore on May 20 last year, according to provisional data released by the Reserve Bank of India on June 30.
Experts said lenders are confident that the sector remains safe for medium to long-term investments. According to projections by CAPA - Centre for Aviation, India’s domestic passenger traffic is likely to rise to 160 million in FY24 and 350 million by FY30.
“There are a lot of opportunities in the aviation sector and it also depends from company to company. So, wherever there are good opportunities, we are open,” said Shanti Lal Jain, managing director of Indian Bank.
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"We lend on a long-term basis and see the strength of the promoter of the airline," the CEO of a bank said on condition of anonymity.
Ashwin Parekh, CEO of Ashvin Parekh Advisory Services, said banks are open to lending to aviation and not worried.
"There have been instances of airlines filing for bankruptcy. But banks majorly look at lending on a long-term basis. They also look at the personal holdings of the promoters, which guarantees safety," said Parekh.
India's carriers carried 12.4 million domestic passengers in June 2023, up 18.8 percent from a year earlier, according to the Directorate General of Civil Aviation. June marked the fourth straight month when domestic air traffic surpassed pre-COVID levels.
01/08/2023 Moneycontrol
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