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Feb 16, 2013, 06.34 PM IST | Source: CNBC-TV18

KFA crisis: Is there a need to tighten rescheduling norms?

Besides the banking sector, the economy as a whole has lost in terms of other creditors, like tax authorities, oil companies, airport authorities and of course employees and shareholders.

AK Purwar

Former chairman, SBI

More about the Expert...

I believe that Indian bankers including public sector and private sector banks are as diligent as any other world class banks could be

AK Purwar

Ex-Chariman

SBI

The final call on Kingfisher Airlines would be an important development for the economy and the banking sector. Banks have an exposure of Rs 7,800 crore to KFA. From the bankers' perspective, with an exposure of Rs 6000 crore in as early as 2010, which subsequently jumped to Rs 7800 crore, it was not an easy call to make as an account of this magnitude would be classified as non-performing assets (NPAs).

In an interview to CNBC-TV18 two banking stalwarts, AK Purwar, former chairman of State Bank of India (SBI) and RK Bakshi, retired executive director, Bank of Baroda share their view on the steps taken by banks and the Indian banking norms.

Below is the verbatim transcript of the discussion on CNBC-TV18

Q: Should bankers have taken this decision in 2010? Is it necessary that bankers should be more strict when a rescheduling is given because it does look like even the Reserve Bank of India (RBI) thinks that banks are happy rescheduling it?

Purwar: What was the total exposure of the banking system on Kingfisher? It was Rs 6000 crore plus. If one account of this magnitude goes into non-performing assets (NPAs) and going down the drain, banking system would take all possible steps to see to that this account gets restructured and may be revived. Unless they see that there is no chance of its revival, they would continue to feed it, continue to give oxygen to it, continue to see it revive.

Q: Can bankers, and that too 17 banks take an exposure of Rs 6000 crore and not go deeply into an industry which has not performed very well globally? Many bankers have told me that the group itself had some problems of repayment or some problems regarding the way it managed its finances, are Indian bankers less diligent?

Purwar: I would be the last person to agree to this statement. I believe that Indian bankers including public sector and private sector banks are as diligent as any other world class banks could be. We are very strict on diligence side.

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Q: Most foreigners who look at this case tell me that in any other country he would have died long ago. Is this true?

Purwar: I have worked abroad. I have seen what has happened throughout the world. In many countries such big exposes are not allowed to languish. Kingfisher is the third big airline of the country, after going out in the market and the impact it had on the customers, consumers is different and therefore every economy, every society, every country and those bankers who have told you, they have told you wrong. Every country tries to make sure that such companies survive unless they find there is just no way they can survive.

Kingfisher Air stock price

On September 24, 2014, at 10:08 hrs Kingfisher Airlines was quoting at Rs 1.90, down Rs 0.1, or 5 percent. The 52-week high of the share was Rs 6.84 and the 52-week low was Rs 1.90.


The latest book value of the company is Rs -166.59 per share. At current value, the price-to-book value of the company was -0.01.

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READ MORE ON  NPAs, RBI, CDR, KFA, restructuring, P&L
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