AI debt recast:Federal doesn't see much impact on balancesheet

Kochi-based private sector lender Federal Bank doesn't fear much impact on its balancesheet due to the proposed debt restructuring of Air India.

"We don't see much of an impact on our balancesheet after the proposed debt recast of Air India, as total provisioning for this will be only around Rs 4-5 crore," managing director and chief executive Shyam Srinivasan told PTI in an interview.

The bank, which has around Rs 400 crore exposure to the aviation sector, has Rs 320 crore exposure to Air India. The rest is to the private sector carrier Kingfisher Airlines, in the form of a bank guarantee to Hindustan Petroleum.

The oil company encashed the cheque recently when the airline failed to pay up its fuel bills.

A few days ago, group of ministers (GoM) led by finance minister Pranab Mukherjee allowed Air India to raise Rs 7,400 crore by issuing government-guaranteed bonds or by other means (subject to cabinet clearance) as a part of the recast plan for around Rs 18,000 crore of its short-term debt.

AI has a debt of around Rs 65,000 crore. As per the finance ministry, the consortium of 14 banks, led by State Bank, is likely to take a collective hit of Rs 2,000 crore on the bottomlines due to lower returns and higher provisioning requirements after the debt recast.

Referring to the possibility of debt restructuring for power distribution sector, Srinivasan said around Rs 450 crore of loan to the Rajasthan State Electricity Board was likely to be restructured in the current quarter.

As per reports, around Rs 18,000 crore of loan of RSEB was in the process of being restructured by 13 banks.

About the bank's joint venture in the life insurance, Srinivasan said the insurance business will not be a drag on its balancesheet. "We have invested around Rs 208 crore in our life insurance venture, and don't see any further infusion in the near future," he said.

IDBI Federal Life Insurance Company is a JV between the state-run IDBI Bank, Aeges and Federal Bank.

Federal Bank, whose GDR is listed on LSE and which is the fourth largest private sector lender in India, posted a net profit of Rs 202 crore in the December quarter, up 41 percent against Rs 143.10 crore in the same period last year.

Total income during the third quarter grew 40.33 percent to Rs 1,604 crore.