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Thursday, March 1, 2012

Oriental Bank to continue financing viable airlines, says new chief

Oriental Bank of Commerce will not shy away from financing viable units in the airline industry just because a few of the players have landed themselves in financial troubles.

“We will not blackout the airline sector. We will continue to finance viable units. We have recently given finance to low cost carrier Indigo. If you can manage the business well, you will get our funding assistance”, Mr S. L. Bansal, who is OBC's new Chairman and Managing Director, said here today.

Standard asset

Mr Bansal, who assumed charge of his new assignment today, said that Kingfisher Airlines was still a standard asset for the bank and that it had a small exposure of Rs 55 crore (as pre-delivery payment finance for aircraft). Mr S. C. Sinha, Executive Director, said that Kingfisher Airlines was so far servicing the interest and that repayments would start only in 2013.

On Air India debt recast, Mr Bansal said that the bank would take a hit of Rs 170 crore in 20 quarterly instalments. OBC's exposure to Air India is about Rs 1,550 crore, said Mr V. Kannan, an Executive Director of OBC.

The banking industry is likely to cumulatively take a hit of Rs 2,000 crore on account of the recent Air India debt recast, say industry insiders.

As Air India had become a restructured advance for the bank, it is required to have a weightage of 2 per cent for provisioning purposes as against 0.4 per cent for a standard asset, Mr Bansal added.

Credit growth

Meanwhile, OBC is aiming at a credit growth of 19 per cent for current fiscal, higher than the expected industry average of 16-18 per cent, according to Mr Bansal.

The bank wants to grow its retail deposit at 20 per cent if credit was growing at, say, 18 per cent, he said while declining to provide a guidance for overall deposit growth.

On overseas branch expansion, Mr Bansal said that the bank would upgrade the Dubai representative office to a full-fledged branch.


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