For Oriental Bank, Kingfisher Airlines account turns substandard

Cash-strapped Kingfisher Airlines has turned into a non-performing asset for the Gurgaon-headquartered public sector lender Oriental Bank of Commerce.

This follows the airline not servicing the interest payments on the bank's exposure of Rs 55 crore (pre-delivery payment finance for aircraft), sources close to the developments said. The repayments were to start in 2013.

OBC will make a provision when it closes its books for the quarter ended March 2012 as the account has turned substandard, they said. OBC's financial results for the financial year ended March 31, 2012, are slated to be released this month end.

The banking industry (13-member consortium) has a total exposure of over Rs 7,000 crore in Kingfisher, of which, Rs 4,000 crore is in the form of term loans.

The OBC Chairman and Managing Director, Mr S. L. Bansal, had in early March said that the bank would not shy away from financing viable units in the airline industry just because a few of the players had landed themselves in financial trouble.

The bank had recently given finance to low-cost carrier Indigo.

OBC is also likely to take a hit of about Rs 170 crore in 20 quarterly instalments from Air India's debt recast. OBC's exposure to Air India is about Rs 1,550 crore.

krsrivats@thehindu.co.in