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| RBI clears debt restructuring for aviation sector |
| Press Trust of India / New Delhi Sep 02, 2010, 20:46 IST |
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 The Reserve Bank of India (RBI) has allowed banks to restructure the debt of the cash-strapped aviation sector to help the beleaguered industry come out of financial turmoil, sources said today.
The RBI has sent a communication to the banks with regard to debt restructuring for airlines, banking sources said.
"The RBI has allowed banks to restructure loans. We will look at the viability of aviation companies," a senior official of Bank of India told PTI.
Bank of India has an exposure of around Rs 4,000 crore to 4-5 companies in the aviation sector.
Interestingly, debt restructuring of the aviation sector comes at a time when non-performing assets of public sector banks rose due to loan recasts of certain sectors like textiles, which faced a tough time due to the global financial meltdown.
Recently, Financial Services Secretary R Gopalan had said the gross NPAs of banks are likely to rise this fiscal from 2.5 per cent of loans in 2009-10 due to restructured debts.
As such, a senior official of another large public sector bank said debt restructuring would be done on a case-to-case basis and the final modalities are being worked out.
However, a confirmation in this regard could not be obtained from the RBI.
The Indian airlines industry is facing mounting debts due to an economic downturn and resultant excess capacity, which still exists. However, the industry of late has been showing signs of recovery which could gather pace if banks restructure their loans.
Last month, State Bank of India (SBI) Chairman O P Bhatt had said, "Aviation sector is on an uptick. It required to come out of stress. However, RBI mandate is necessary."
SBI has a Rs 3,500 crore exposure to the aviation sector, which comprises 0.24 per cent of total advances, he had said.
According to an estimate, the cumulative debt of the airline industry stands at about Rs 60,000 crore. As of March, 2010, Air India had about Rs 40,000 crore debt, while Kingfisher had a debt of about Rs 6,000 crore.
Civil Aviation Minister Praful Patel had last month said, "The RBI has to come up with guidelines for the restructuring of debt of the aviation sector. As far as my ministry is concerned, we support it... I believe that the RBI is actively looking into the issue."
Major carriers like Air India and Jet Airways have plans to restructure their debt and have been in talks with banks to get soft loans instead of high-interest ones.
"In the case of Air India, it (debt restructuring) is very much active on the government's agenda," Patel had said.
Patel had said the aviation sector is a major infrastructure sector and should be treated that way.
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