RBI may allow longer provisioning for AI loan recast

For helping banks to restructure loans extended to Air India, which the airline is now unable to repay as scheduled, the RBI could allow provisioning for these over a longer period of time.

“The purpose of provisioning it is to strengthen the balance sheet of banks and, therefore, whatever provisioning (for loans going bad) is required, generally we don’t compromise with it. The only thing we can do is, if the amount is very large, we can spread it over a period of time,” said RBI Deputy Governor Anand Sinha, in a general interaction with analysts and researchers on Wednesday.

Of Air India’s total debt of Rs 43,000 crore, bank loans worth Rs 22,500 crore are to restructured. According to RBI norms, banks need to set aside two per cent of the loan amount for the purpose of provisioning. SBI Caps had proposed converting the loan amount into bonds that could be part of the list of approved securities for calculating banks’ SLR. However, Sinha reiterated that RBI was not comfortable with the idea a day after RBI Governor D Subbarao had said the same thing.