More banks refuse fresh loans to Kingfisher Airlines

Carrier immediately needs Rs 2,500 crore as working-capital loans to clear dues

Kingfisher Airlines’ last ray of hope for bank funding seems to have faded. The Vijay Mallya-promoted airline, passing through financial turbulence, had approached banks yet to classify its existing loans as non-performing, but they refused fresh funding.

While most of the bigger players such as State Bank of India, Punjab National Bank and Bank of Baroda have identified loans to Kingfisher as non-performing, a few mid-sized one such as Oriental Bank of Commerce, United Bank of India and others are yet to classify it so.

According to asset classification norms laid down by the Reserve Bank, an account becomes non-performing if the principal and/or interest are due for more than 90 days.

The airline immediately needs Rs 2,500 crore as working-capital loans to clear dues and get back on track.

“The airline approached us recently for fresh funding. Though the existing exposure is yet to become NPA (non-performing asset), there are dues. We have turned down the proposal and asked them to regularise the account,” said the chairman and managing director of a public sector bank.

He said the airline was yet to make a formal presentation.

An airline spokesperson said he did not want to comment on the relationship with banks, adding no formal proposal had been made to any bank.

Some banks may declare the loans NPA this quarter, if the airline fails to service the debt by March 31.

Banks that have identified the account as an NPA have provided coverage for loans that turned bad and mark-to-market losses on the equity portfolio, owing to a fall in Kingfisher’s share price.

That banks for whom Kingfisher loans were still performing assets should think about fresh funding was an idea mooted by SBI Caps (merchant banker for the airline’s debt recast) in a meeting last month.

Last year, banks restructured the airline’s debt of about Rs 7,000 crore and converted a part of it into equity.