Debt-ridden airlines get relief with RBI's move
22 September 2010
Finally, airlines with huge debt burden have got some relief from the Reserve Bank of India (RBI) - The bank will no longer consider restructured loans of airlines as non-performing assets.
Most of the airlines are on the verge of default on loan repayments to banks and therefore will not be able to raise money from the markets. Together the big three carriers Air India, Jet and Kingfisher have accumulated debts to the order of Rs60,000 crore, which would be difficult to repay thanks to the recent downturn in the global aviation industry.
Aviation ministry officials say the RBI's decision would give domestic carriers a fresh lease of life.
With the RBI allowing banks to restructure airline debts on an individual case basis the aviation sector will be substantially benefited. Officials say the airlines can get a moratorium on repayment of loans without being labelled NAPs and the move would help relieve pressure on banks from spoiling their balance sheets due to the huge exposure to airlines ,while extending them relief fro repayment.
While Air India has about Rs40,000 crore loans (for acquisition of aircraft and working capital) and Jet-Kingfisher together owe around Rs20,000 crore. SBI has extended loans to carriers to the tune of Rs3,000 crore while Bank of India's exposure to the aviation sector is around Rs4,000 crore.
According to aviation minister Praful Patel airlines had earlier got relief on payment to oil companies and now the RBI has stepped in to help.