A consortium of 26 lenders to the debt-laden carrier that include State Bank of India , ICICI Bank , Bank of Baroda among others will meet on Monday to discuss the loan recast, one of the sources said, adding the process would be completed within 120 days of the approval.

"I think banks will approve it on Monday. It is in the best interest of banks to do it soon," the source said.

Air India's lenders had submitted a restructuring proposal to the Reserve Bank of India seeking its permission to extend the loan tenure, among other things, the sources said.

Air India, with total loans of $9.5 billion, is in talks with banks to restructure its working capital debt and is in the midst of implementing a turnaround plan to generate cashflows.

The carrier is expected to post a pre-tax loss of 70 billion rupees for the year-ended March, as per government estimates, hit by a bloated cost structure and stiff competition.

The CAG had in September criticised Air India's decision to buy 111 Boeing and Airbus planes in 2005/06, saying it imposed an "undue long term financial burden on the carrier".

The airline has not posted a profit since merging with former state-owned partner Indian Airlines in 2007 and relies on handouts from New Delhi to survive.

The cabinet has approved an equity infusion of $112 million into the ailing carrier.

The aviation minister Vayalar Ravi said that the government was still in talks with the RBI on Air India's balance sheet, financial position and future projects.

Reuters