AI had approached its existing lenders for more funds as the governments promise to pump in fresh equity has got delayed. But three banks State Bank of India, Corporation Bank and Indian Overseas Bank FE spoke to said they have declined to provide any more cash as they fear a repayment default.
A senior official at one of the banks said, We had politely said no to AI's request for more funds.
He said though it is a performing account, it has shown signs of stress.
We dont want to take any risks despite the fact that it is a wholly government-owned company, another official added. According to them, the banks will wait for a cue from how the government decides on providing fresh equity, before they lend afresh.
In fact, the perspective they gave shows AI managing its finances much like a regular defaulter. They (AI) wait for the last day and pay their interest on the 89th day as a day after (they) will end up as defaulter as per banking rules, said one of them.
Sometimes, we have to take a tough stand to get the interest, he added.
The bottom line Any further exposure will be risky when we are handling depositors' money.'
Giving a different perspective, AI finance director S Venkat said: We are not raising any fresh loans as we are restructuring our existing loans and also awaiting government's R6,500-crore equity infusion.
The carrier, with R5,551 crore of accumulated losses until March 2010 and R22,000-crore debt had asked both Corporation Bank and Indian Overseas Bank for R300 crore each and R1,000 crore from SBI as working capital. Both Corporation Bank and Indian Overseas Bank have lent R1,300 crore to the national carrier, which continues to lose market share to international and domestic rivals.
Other public sector banks, including Canara Bank and Central Bank of India, which have lent AI R1,500 crore said they are yet to receive a request for fresh loans.
If asked, we will also decline as any further exposure is not safe, an official from one of the banks said. Basically they are tapping the banks with whom they have lower exposure.'
According to the bankers, AI's first debt-recast plan drafted by SBI Caps and approved by the Reserve Bank India is yet to be implemented. SBI Caps is now working on a second restructuring plan. As an intermediate step the Centre is likely to put in Rs 6,600 crore of fresh equity to repay some of the bank loans.
The bankers are willing to sacrifice some of the interest component on these deferred payments to recover the principal. But they said the airline should move fast as the deadline for the implementation of the restructuring plan has ended in October.