Air India defaults on loan instalments

21 May 2011

1

On the rocky road to survival flag carrier Air India registered another milestone by defaulting on interest payments to banks for the second month running. The default has raised concerns among lenders about the possibility of the carrier turning into a non-performing asset (NPA), with three consecutive defaults.

Burdened with a massive debt of Rs40,000 crore, AI may have outstanding interest payments of Rs400 crore over the last two months, sources said.

Failure to meet payment instalments (principal and interest) for three consecutive months, would give lenders the right to classify the loan as an NPA.

The lenders are a consortium of 22 banks led by the SBI.

Air India now finds itself in a tight spot as public sector banks have refused to extend further loans as the carrier has reached the debt ceiling and the banks are unable to extend further credit.

"We have reached an upper limit for funding Air India and are unable to lend more," said a senior bank official.

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