Lenders to the ailing Kingfisher Airlines will recall their loans as the carrier has been unable to come up with a feasible plan to restart operations.
Shyamal Archaya, deputy managing director at State Bank of India, the lead banker of the 17-member lenders' consortium, told NDTV Profit, after a meeting of lenders today, that each lender will now go back to its own senior management, and it is up to the management of the respective bank to take a call on whether to recall its loan to the ailing carrier.
"Each bank board will have to take a decision to call up their assets," the SBI deputy managing director said.
The lenders may move DRT, that is the Debt Recovery Tribunal, or proceed under the provisions of the SARFAESI Act, which empowers lenders to recover their non-performing loans without court intervention through securitisation or asset reconstruction.
Meanwhile, Sanjay Agarwal, CEO of Kingfisher Airlines, who was also present at the meeting, said the airline will likely fly again.
"Mr (Vijay) Mallya has assured salary payments, and we are currently working on a plan to fly again in the summer schedule," Mr. Agarwal said.
Reacting to the lenders' meet, Mr Agarwal said: "We will will wait for an official communication on this from the lenders' consortium."
The consortium of banks has extended Rs. 7,000 crore loans to Kingfisher. SBI alone has an exposure of Rs. 1,500 crore, which has not been serviced since January 2012.
As per a revival plan submitted to the Directorate General of Civil Aviation (DGCA) in December 2012, Kingfisher had said it would require about Rs. 652 crore over the next 12 months for running its operations. These funds would come from the Mallya-owned United Breweries Group's resources as banks were unwilling to fund the cash-strapped airline.
Of the Rs. 652 crore that the airline needs to restart operations, Rs. 120 crore would be needed to meet salary arrears.
However, the government last month made it clear that Kingfisher would not be allowed to fly until it has cleared all its dues, including pending salaries.
For the third quarter ended December 2012, the airline reported a net loss of Rs. 755.17 crore, a period when it did not operate a single flight.
The debt-laden airline lost its flying licence on December 31, 2012, after failing to convince the aviation regulator about how it plans to fund operations under a proposal to get airborne again. The licence was due to expire on this date.
Kingfisher has two years from now to get its license renewed, but it has to convince banks, airports, tax authorities and its staff about its viability, sources told NDTV Profit. The airline, which has not flown since October, owes money to all of them.
The shares of the airline surged 5 per cent to close the day on the Bombay Stock Exchange at Rs 11.13.