Lenders discuss ways to keep Air India afloat
20 Jan 2012
Lenders to heavily-indebted national carrier Air India are considering three debt restructuring options to keep the stricken carrier afloat. Bank officials held a meeting at the Mumbai headquarters of the State Bank of India yesterday to discuss the future of the ailing carrier, which is struggling to pay its staff in recent months.
According to SBI chief Pratip Chaudhuri, who spoke to reporters after the meeting, the restructuring exercise would need to be completed by March to prevent the loans being classified as non-performing, which would mean that banks would have to set aside more capital.
The first option is to treat the national's carrier's Rs22,000 crore debt as part of the Statutory Liquidity Ratio or SLR obligations that banks have to meet. Banks have to invest 24 per cent of their deposits in government securities which have SLR status. Banks would require approval from the Reserve Bank of India to assign Air India loan the same status as government securities.
If the RBI were to agree, banks would not be required to set extra capital, known as provisioning, as the loans would have SLR status.
The second option under consideration is granting SLR status to 40 per cent of the debt and converting the rest into long term loan, which would require banks to set aside Rs2,100 crore by way of provisions.
The third option would be to convert the entire debt into a long term loan with government guarantee. The loans would carry interest rate in the range of 11-11.50 per cent, which would require banks to set aside Rs3,400 crore.