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Loans to Kingfisher not a systemic risk, says Chakrabarty

Kingfisher Airlines owes more than Rs 7,000 crore debt to 17 lenders

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The Reserve Bank of India (RBI) Deputy Governor KC Chakrabarty today said that loans given to do not pose a systemic risk to the banking sector. He refused to comment further. Kingfisher Airlines owes more than Rs 7,000 crore debt to 17 lenders.

The account has slipped into the non-performing assets (NPA) category for most of them including State Bank of India, Bank of India, Bank of Baroda and Punjab National Bank."We are expecting a proper operational plan from the company in few days," said a senior official from a public sector bank that is part of the consortium that lent to Kingfisher.
SBI, which has around Rs 2,000 crore of exposure to the ailing carrier, has ruled out any further lending to the company. Last week, SBI Chairman Pratip Chaudhuri said that there was no room for more lending to Kingfisher. However, in the latest meeting with the company management, bankers had agreed to allow the company keep 80% of the funds unfrozen by tax authorities. The funds were to be strictly used for paying long pending salaries of Kingfisher employees.

Presently, the employees are on strike and the airline has announced a lockout till October 12, 2012. Due to this the company has been slapped with a show-cause notice by the Directorate General of Civil Aviation to explain why its aviation licence should not be cancelled.

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