The State Bank of India-led consortium of banks is believed to have made fresh representations to the Reserve Bank of India urging it to provide additional exemptions from provisioning on the debt-recast plan of Air India.

Fresh exemptions were sought on account of diminution in the fair value of the loans — indicating a deterioration in the cash-flow outlook of the airliner — to be restructured.

In a recent representation, banks have asked for a five-year period for setting aside provisioning on the restructured loans as against two years suggested by the apex bank, said a senior official at SBI Caps. SBI Caps has been overseeing the debt recast plan of Air India.

The RBI, which had given a conditional nod to the recast plan in November, is likely to come out with its final statement on the issue by the end of this month. The package — once approved by the central bank — will go to the Cabinet for approval.

“There is a mark-to-market provisioning that has to be done in case of restructured assets and RBI has given us eight quarters for doing it (similar to what they had allowed during the debt recast of Kingfisher Airlines). We have asked for a longer tenure,” the senior official said on condition of anonymity.

In case of a restructured standard asset, banks have to set aside some amount as provisioning towards diminution in the fair value of the loans — which typically means the cash flow position based on original projection and the cash flow position in the present economic conditions.

“Banks will have to make a provisioning for the difference between these two cash flow positions,” said a senior bank official, whose bank has a reasonably large exposure to the airline. The consortium has also sought the central bank's permission to classify the proposed cumulative preference shares in the “held to maturity” (HTM) category instead of “available for sale' (AFS).

Air India's debt recast plan as approved by the RBI includes conversion of short-term working capital loan of Rs 7,000 crore into cumulative preferential shares and more time to repay the remaining debt amount of approximately Rs 14,000 crore.

The airline has total of Rs 21,511.10 crore as short-term working capital loans. It pays an interest of over Rs 2,600 crore annually.

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