'Loans to Kingfisher not a systemic risk'

Reserve Bank of India Deputy Governor K C Chakrabarty on Monday said loans to Kingfisher Airlines did not pose a systemic risk to the banking sector. He, however, refused to comment further. Kingfisher Airlines owes about Rs 7,000 crore to 17 lenders. These loans have turned non-performing assets in the books of most of its lenders, including State Bank of India (SBI), Bank of India, Bank of Baroda and Punjab National Bank.

“We expect a proper operational plan from the company in a few days,” said a senior official from a public sector bank, part of the consortium of lenders to Kingfisher.

Last week, SBI Chairman Pratip Chaudhuri said there was no room for more loans to Kingfisher.

In the last meeting with the company management, bankers had agreed to release 80 per cent of the funds unfrozen by tax authorities. These funds, they said, would have to be used to pay salaries to the airline’s employees.

Currently, employees of the airline are on strike and the company has announced a lockout till October 12. The Directorate General of Civil Aviation has issued a show-cause notice to the company, asking it to state why its aviation licence should not be cancelled.