Wednesday, December 28, 2011

Finmin rejects Air India debt recast plan- paper

Dec 28 (Reuters) - India has opposed the plan to recast debt of ailing state-run carrier Air India as it will force state-owned banks to take a big hit, the Economic Times reported on Wednesday, citing the financial services secretary.

According to the debt restructuring plan, banks will be required to set aside about 96 billion rupees ($1.8 billion) as provisions against total loans outstanding of 224.50 billion, the paper said.

'Banks do not have the capacity to take such a huge sacrifice on their books,' D.K. Mittal told Economic Times, adding there were plans to work out a package where the risk allocation was 'proper' and provision requirement 'lower'.

Air India spokesmen were not immediately reachable for a comment by Reuters.

A consortium of lenders to Air India has broadly approved its financial restructuring plan which includes extension of the tenure of about $4 billion of working capital loans as well as converting some of the loans into equity.

The consortium has 26 banks and is led by state-run State Bank of India, the largest in the country. IDBI and Bank of Baroda are others in the consortium with exposure to the loss-making carrier.

($1 = 53.03 rupees)

(Reporting by Swati Pandey in MUMBAI; Editing by Subhadip Sircar) Keywords: AIRINDIA DEBT/

(swati.pandey@thomsonreuters.com)(+91-22-6636 9123)(Reuters Messaging: swati.pandey.reuters.com@reuters.net)

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Source: http://www.xe.com/news/2011/12/28/2370697.htm?utm_source=RSS&utm_medium=TL&utm_content=NOGEO&utm_campaign=News_RSS_Art5

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