Rs 1,000-cr cushion for banks?

Key lenders to the bleeding Kingfisher Airlines including State Bank of India, Bank of India, Bank of Baroda and Punjab National Bank have more reason to worry. Mahua Venkatesh reports.

Key lenders to the bleeding Kingfisher Airlines including State Bank of India, Bank of India, Bank of Baroda and Punjab National Bank have more reason to worry.

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A consortium of 13 banks led by SBI, which holds 23.4% in the airline, could even ask UB group chairman and promoter Vijay Mallya to sell out. Indications are that the banks may need a Rs 1,000-crore cushion in case the loans turn bad.

Lenders feel Mallya must include banks in chalking out a restructuring package. "We need to take a call on what we should do with our stake in the company, which is bleeding and is unlikely to fetch any return," said a chairman of a public sector bank which has substantial exposure to Kingfigher. "In case the promoter has no money to infuse and is only seeking help from banks and the government, he should look at a sell out."

Banking trade unions have suggested that the airline be nationalised as part of its bailout package. Banks are not keen on providing any further working capital loan to the airline, even as Prime Minister Manmohan Singh hinted on Sunday that the government may look at a bailout package for Kingfisher.

"If the promoter does not have money to pay banks, the carrier should be nationalised, why should public money go in bailing out airline," CH Venkatachalam, general secretary, All India Bank Employees Association told HT

Analysts said that the consortium of 13 banks would be required to provide a provisioning of over Rs 1,000 crore only on account of Kingfisher. The amount could rise depending on the situation which would be reflected in their annual balance sheets in March.