Lenders mull escrow account for KFA bailout
Lenders to the bleeding Kingfisher Airlines (KFA) may look at setting up an escrow account to ensure transparency in the disbursement and allocation of fresh funds.india Updated: Mar 01, 2012 23:27 IST
Lenders to the bleeding Kingfisher Airlines (KFA) may look at setting up an escrow account to ensure transparency in the disbursement and allocation of fresh funds.
An escrow account is an agreement between banks and other relevant parties, in which the funds in the account do not belong to the accountholder and cannot be therefore used to deal with his other creditors.
“One of the options that is being looked at is setting up an escrow account to handle the fresh funds that banks could lend,” a senior executive of a public sector bank, who did not wish to be identified told HT.
Public sector banks — the prime lenders to the Vijay Mallya-promoted airline—have come under scanner from various groups for agreeing to provide fresh credit to Kingfisher.
“Why should Kingfisher be treated differently from other defaulters?” a member of a trade union said. “In case banks are planning to provide fresh line of credit to the airline, then why not to others, who have defaulted?”
State Bank of India has an exposure of Rs 1,410 crore to the beleaguered airline, Punjab National Bank (PNB) and Bank of India (BoI) have exposures to the tune of Rs 719 crore, Rs 702 crore and Rs 552 crore respectively to Kingfisher. Private sector lender ICICI Bank has an exposure of Rs 430 crore.