Civil aviation secretary M Madhavan Nambiar is meeting his finance ministry counterpart Ashok Chawla on Wednesday to discuss ways to bring about debt relief for domestic airlines. Carriers in India have accumulated debt over Rs 60,000 crore, of which state-owned Air India alone accounts for about Rs 40,000 crore.
?The issue is essentially between banks and airlines. We are still to talk to banks and financial institutions to facilitate debt restructuring, since airlines are the key players. We are having discussions with the finance ministry to see how this (loan recast) can be done,? an aviation ministry official told FE. ?Major domestic carriers are under financial stress,? the official added.
Facing a severe cash crunch, Vijay Mallya group?s Kingfisher Airlines recently requested lenders to extend repayment period and lower interest rates. The airline owes about Rs 6,000 crore to banks including State Bank of India and IDBI. The Naresh Goyal-led Jet Airways? borrowings stand at Rs 14,818 crore.
Airlines borrow abroad to buy aircraft, which are pledged with the lenders. Working capital needs are met with unsecured credit from domestic lenders.
While the finance ministry will not provide any direct support for airlines, it can speed up restructuring by bringing banks, airlines and the Reserve Bank of India to the table.
Indian Banks Association, meanwhile, plans to approach the RBI to allow banks to reschedule loans of airlines without treating them as bad assets. The RBI would consider restructuring debt for the sector and not any particular company.
RBI has asked SBI Caps to prepare a technical report on the proposed restructuring package for aviation.
