Banks decide to start recovery of Kingfisher loans

Banks decide to start recovery of Kingfisher loans

Enough time given to grounded airline for restarting operations

Banks decide to start recovery of Kingfisher loans

The commercial banks which had lent Kingfisher Airlines (KFA) Rs 7,500 crore to sustain operations, have decided to recall the entire amount after the company failed to come up with a viable business plan to keep afloat, said a senior State Bank of India officer on Tuesday.

“We have decided to recall (initiating the recovery process) the loans given to Kingfisher Airlines. However, each bank board will decide on the future course of action,” SBI Deputy-Managing Director (Mid-Corporates), Shymal Acharya, told reporters after a two-hour meeting of the bankers and KFA representatives on Tuesday.

The meeting was attended by five banks, led by SBI, and the airline’s management, including CEO Sanjay Agarwal and UB Group president and CFO Ravi Nedungadi. The decision comes despite Kingfisher chairman Vijay Mallya assuring the employees of paying salaries due for 11 months and restarting operations this summer.

During his meeting with the KFA employess last week, Mallya reportedly said efforts to revive the airline were underway, but did not commit on any date for disbursal of salary.

The banks will now ask KFA to refund the entire money borrowed from the consortium led by SBI, instead of going for any restructuring scheme. The banks usually resort to such measures after all other avenues of recovering the money closes.

Recalling of loan involves a legal procedure which may even lead to banks selling assets of Kingfisher which they hold as collateral, said a banker. “It will now be referred to a legal consultant,” he said, adding that there were several ways to recall the loan, but declined to elaborate.

Experts averred that the banks which partook in the KFA loan exposure will have to obtain clearances from respective boards before starting the procedure. 

The State Bank of India has the biggest exposure of over Rs 1,600 crore to KFA, while the Punjab National Bank and IDBI Bank have an exposure of Rs 800 crore each. The Bank of India has Rs 650 crore and the Bank of Baroda has Rs 550 crore. KFA officials were not available for comment on the latest development. Kingfisher’s flights have remained grounded since October 1, 2012, initially due to a strike by its employees over non-payment of salary.

Thereafter, its licence was suspended. The airline’s licence expired on December 31, 2012, after the government refused to renew it.

The airline has incurred losses since its inception in May 2005. At present, it owes more than $ 2.5 billion to lenders, suppliers, leasing companies, airport operators, other airlines, employees and the government in taxes.

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