RBI agrees to restructuring proposal by Air India:
Air India Ltd has won the central bank’s approval for a debt recast plan crucial to the state-run carrier receiving desperately needed government funds over the next 10 years. The Reserve Bank of India (RBI) has, however, approved some of the loss-making carrier’s proposals while rejecting others, according to two senior executives of the airline.
Important:
- The loans will not be “Non Performing Assets” even though they are, technically, non-performing.
- But they will carry a provisioning of 2% rather than the otherwise “standard” 0.4% on regular loans.
- But because of the restructuring the risk weight given to the loan is higher than 100% – which means banks will effectively have to put more capital reserve against these loans.
- 11,000 cr. of short term working capital is being converted into long-term debt, and another 7,000 may be moved into cumulative preference shares. That’s 18,000 cr. worth of restructuring.
- Air India needs to get profitable operationally next year and post a net profit (net of interest and tax) by 2018. Otherwise…don’t kid yourself, otherwise they’ll get more money.
The worst is this:
Air India is seeking total equity support of Rs. 42,920 crore till fiscal 2021. It also wants government guarantees for aircraft loans worth Rs. 30,584 crore till fiscal 2021.
Your. Tax. Money. Down. The. Drain.
