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Thursday 26-Aug-2010 RBI may intervene to recast aviation sector's debt

The Reserve Bank of India (RBI) is working on a debt repayment programme which would prove a breather for the aviation industry reeling under financial stress.

By  Traveltechie Bureau | Mumbai

the Reserve Bank of India (RBI) is working on a debt repayment programme which would prove a breather for the aviation industry reeling under financial stress. According to an estimate, the debt of airline industry is about Rs 60,000 crore. As on March, 2010, Air India had about Rs 40,000 crore debt, while Kingfisher Airlines had a debt of about Rs 6,000 crore.

OP Bhatt, Chairman, SBI said, “There was some discussion (on debt restructuring). RBI has said they will come out with something within a week or so. Aviation sector is on an uptick. However, RBI mandate is necessary. SBI has Rs 3,500 crore exposure to the aviation sector, which comprises 0.24 per cent of total advances.”

“Aviation sector is under stress but RBI is working on debt restructuring and it should come out with guidelines in the next few weeks,” mentioned TM Bhasin, Chairman and Managing Director, Indian Bank. As per MD Mallya, Chairman and Managing Director, Bank of Baroda the bank has exposure of about Rs 3,000 crore. Banks are awaiting guideline from the RBI on debt recast.

Earlier this month, Civil Aviation Minister Praful Patel said, “The RBI has to come up with guidelines for restructuring of debt of the aviation sector. As far as my ministry is concerned, we support it. I believe that RBI is actively looking into the issue.”

Major carriers like Air India and Jet Airways have plans to restructure their debt and have been in talks with banks to get soft loans instead of high-interest ones. “In the case of Air India, it (debt restructuring) is active on the government’s agenda,” said Patel.