AI to seek norms waiver from RBI
Bleeding national carrier Air India is planning to approach the Reserve Bank of India (RBI) for a special waiver of its provisioning norms.india Updated: Jul 05, 2011 01:58 IST
Bleeding national carrier Air India is planning to approach the Reserve Bank of India (RBI) for a special waiver of its provisioning norms.
AI has defaulted on payment of service tax and interest on working capital, and owes around Rs 48,000 crore in loans and payments to vendors.
Its loans would become non-performing assets (NPAs) as per RBI provisioning norms, if the interest liability or the repayment of loan is not made by July-end.
Documents accessed by Hindustan Times reveal that the airline will approach RBI once the business plan prepared by SBI Caps is cleared by lenders.The airline would also approach the finance ministry for a suitable commitment on equity support as well as comfort letter which the lenders may seek.
Banks have already stopped lending to AI and in the event of a default government guarantees would be triggered affecting the credibility of the sovereign. The cross default clause would also apply thereby invoking the guarantee under various aircraft loans.
If AI's loans become NPAs, banks may sell off the assets that it had pledged to secure loans and freeze its accounts, which would bring operations to a halt.
The restructuring is likely to bring an interest relief of Rs 600 crore by way of reduction in interest cost on working capital as well as ease the liquidity position. Refinancing of certain long term loans would provide interest relief of Rs 280 crore.
First Published: Jul 04, 2011 22:30 IST