Kingfisher crisis: Banks likely to recall loans

Posted By:
Subscribe to Oneindia News
New Delhi, Oct 3: Kingfisher Airlines's lockout has pressurised lenders to hasten action against the carrier owned by Vija Mallya, said a Times of India report on Wednesday. The lenders have a combined exposure of Rs 8,000 crore. Bankers were considering a recall of loan or encashing securities so that their losses were kept at a minimum. [Read: Kingfisher air-hostess killed in Chennai amusement park]

The lockout has warned the lenders that recovering their funding to the grounded airliner might not be easy. Kingfisher looks a 'doubtful asset' and this quarter almost all banks would have been compelled to hike the provisioning or funds they keep aside in case they face a potential loss, said the report.

The categorisation of the airline as a 'doubtful' asset shows the sharp downgrading of its credit-worthiness. Last year, the Kingfisher was tagged 'sub-standard' after it failed to settle dues after its bank guarantees were invoked. The latest downgrading meant that provisioning would be doubled to 30%.

According to the ToI report, the SBI has set aside Rs 1,300 crore for a potential loss but the move has led to a debate within the banking circles whether things were carefully carried out before bailing out the airline.

During a controversial loan restructuring in 2011, the Kingfisher authorities had given a long list of securities including Mallya's personal guarantees to promoters' shares and others.

According to a senior official, the lenders had two options before them: either to sell the securities or sell the airline. A top bank official said one could not wait endlessly and if the promoters failed to infuse funds, the bank would have few options other then recalling the loan, said the daily report.

OneIndia News

Please Wait while comments are loading...