Treat loans to airlines as regular loans: Bankers to RBI

Banks have presented their wish list of concessions they want to restructure loans for the aviation sector. For some months now banks have been requesting the Reserve Bank of India (RBI) to ease the restructuring rules for this beleaguered sector. RBI had asked them to come with a concrete list of suggestions. That list was presented by the bankers today, reports CNBC-TV18’s Gopika Gopakumar.

Bankers have asked the RBI to treat these loans to airline companies as regular loans, which is not as bad loans. Any change in the classification of these loans could lead to a breach in the agreement between airline companies and the foreign leasing companies. There is a fear that these leasing companies could pull back the aircrafts if they find that domestic carriers have defaulted on bank payments. Hence banks have asked the RBI to treat the loans outside the corporate debt restructuring, normally the case with non-performing loans.

Banks have also asked the RBI to lower the provisioning for these loans. Loans to the airline industry are normally treated as unsecured loans and upon restructuring banks have to make higher provisioning. Banks have therefore asked for an exemption only in the case of airline companies.

More time has been sought by banks for the promoters to make their contribution. Bankers have asked the RBI to give promoters six months’ time to raise equity to make the promoter’s contribution for restructuring. Normally for restructuring, promoters have to make an upfront contribution at the time of restructuring.