RBI may intervene to recast aviation sector's debt

The Reserve Bank of India (RBI) is working on a debt repayment program which would prove a breather for the aviation industry reeling under financial stress, say bankers.

"There was some discussion (on debt restructuring). The RBI has said they will come out with something within a week or so," SBI Chairman O P Bhatt told PTI.

"Aviation sector is on an uptick. It required to come out of stress. However, RBI mandate is necessary," he said.

SBI has Rs 3,500 crore exposure to the aviation sector, which comprises 0.24 per cent of total advances, he said.

According to an estimate, the debt of airline industry is about Rs 60,000 crore. As on March, 2010, Air India had about Rs 40,000 crore debt while Kingfisher had a debt of about Rs 6,000 crore.

Aviation sector is under stress but RBI is working on debt restructuring and it should come out with guidelines in the next few weeks, Indian Bank Chairman and Managing Director T M Bhasin said.

As per the Bank of Baroda Chairman and Managing Director M D Mallya, the bank has exposure of about Rs 3,000 crore. Banks are awaiting guideline from the RBI on debt recast.

Earlier this month, Civil Aviation Minister Praful Patel had 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 said.

He said such a move is important, because in 2008-09, the aviation sector around the world had gone through a bad phase. He expressed optimism that the regulator would actively pursue the matter.

Patel said the aviation sector is a major infrastructure sector and should be treated that way.