Oriental Bank of Commerce (OBC) has initiated steps to recover the Rs 55 crore fund exposure it had to the grounded Kingfisher Airlines (KFA).
With the KFA account turning into non-performing asset (NPA) for the bank in the December quarter, OBC has now invoked a guarantee provided by the aircraft manufacturer, Airbus Industrie, it is learnt.
Unlike most public sector banks, which had, through consortium, provided working capital finance for this private airline, OBC had separately extended pre-delivery payment (PDP) financing for aircraft acquisition.
Two other public sector lenders had also extended PDP financing. PDP financing refers to financing of progress payments that a purchaser makes to a manufacturer while new aircraft are being built.
OBC had, through PDP financing, funded the initial advance for certain aircraft ordered by KFA.
There was no specific collateral obtained directly from the airline, but the funding was extended on the back of a guarantee furnished by the airline manufacturer, it is learnt.
KFA was a standard account for Oriental Bank till the September quarter. But the grounded airline turned NPA for the bank as it could not service the interest liability, sources said.
Now, with the guarantee having been invoked and aircraft orders under the PDP facility sought to be cancelled, OBC is confident of recovering most of the dues in the next few weeks.
S.L. Bansal, Chairman and Managing Director of Oriental Bank, has said that the bank had not written off the exposure to KFA. “We have already initiated few steps and we are confident that our money will come back 100 per cent. We are not worried on that front”, Bansal said.
Meanwhile, OBC is all set to treat its exposure of Rs 150 crore to wind energy major, Suzlon Energy, as restructured advance in the current quarter.
This follows Suzlon Energy getting the Corporate Debt Restructuring cell’s nod for revamp of Rs 9,500-crore debt.