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Banks To Recover Rs 1,000cr From KFA In This Quarter

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Kingfisher lenders hope to recover up to Rs 1,000 crore of their dues by monetising the securities in the March quarter itself, a senior official of SBI said on 14 February. "That (selling the securities given as collaterals) is the plan," Shyamal Acharya, SBI Deputy Managing Director (Mid-Corporates Accounts), told reporters at the bank's December earnings press conference here. He was asked specifically for a timeline to recover the dues from the grounded Bangalore-based airline.

Acharya explained that the consortium of 17 banks, led by SBI, has an outstanding of over Rs 7,000 crore from the carrier but has shares of listed entities like United Spirits as collaterals which should realise Rs 500 crore. That apart, they have the brand Kingfisher as a security.

Additionally, the consortium has a residual right over the securities held by Srei Infrastructure Finance, which comes to Rs 500 crore. Srei bought this from ICICI Bank in April last year.

"These are low-hanging fruits which should give us Rs 1,000 crore. Balance is corporate guarantees, personal guarantees and properties," Acharya said, adding the total collaterals held by the banks comes at Rs 6,500 crore.

SBI has the maximum exposure, over Rs 1,600 crore, in the Vijay Mallya-led airline, followed by PNB (with Rs 800 crore, IDBI at Rs 800 crore, Bank of India at Rs 650 crore and Bank of Baroda has Rs 550 crore.

Other banks include United Bank of India, which has an exposure of Rs 430 crore, Central Bank of India (Rs 410 crore), Uco Bank (Rs 320 crore), Corporation Bank (Rs 310 crore), State Bank of Mysore, (Rs 150 crore), Indian Overseas Bank (Rs 140 crore), Federal Bank (Rs 90 crore), Punjab & Sind Bank (Rs 60 crore) and Axis Bank (Rs 50 crore).

Lenders outside the consortium are Srei Infrastructure (Rs 430 crore), Jammu & Kashmir Bank (Rs 80 crore) and Oriental Bank of Commerce (Rs 50 crore).

Banks in the consortium, which on Tuesday decided to start the recovery process, may individually start sending legal notices for the recovery to the airline in 10-15 days, he said.

"Giving a notice will happen when each bank formally decides to call off the advances. May be it is a matter of 10-15 days when each bank will formally approve the calling off loans and then the consortium will serve notices," he said.

Calling off the advances to Kingfisher was not on the agenda of today's board meeting of country's largest lender, Acharya said.

SBI Chairman Pratip Chaudhuri said the bank will be very sceptical about lending to other Mallya-promoted firms.

"If the promoter gets classified as a director in a defaulting company, then it becomes difficult or almost impossible to lend further to other group companies. Further exposure definitely gets put on hold," the Chairman said.

Meanwhile, the SBI management dwelt on lessons learnt from the Kingfisher fiasco and maintained they need to be extra cautious when dealing with such cases, he said.

It also addressed criticism of having been too generous to the airline, which never made profit since its launch in May 2005, and had restructured around Rs 6,500 crore of bank loans in November 2010 by giving more time, Chaudhuri added.

"Aviation is a difficult business; its not to say that only this airline is in losses. If you pull the plug, it is good neither for the company, nor for the lenders. Sometimes it works and sometimes in hindsight, it does not," Chaudhuri said, pointing that the same approach worked for the banks with regard to the state-run Air India.

Kingfisher has been grounded since October 1 last after a labour unrest over non-payment of staff salaries.

Banks were hopeful that some money would flow into KFA after Mallya sealed a Rs 11,170-crore deal by selling majority stake in his liquor business United Spirits to UK's Diageo.

Mallya had, however, nixed possibility of any such move.

The lenders were also banking on some equity infusion into the carrier by a foreign firm after changes in aviation FDI rules, but no investor has come forward to rescue KFA.

All the 17 banks have provided for their exposure to the airline and declared them as bad loans. KFA is sitting on a debt of over Rs 7,000 crore in banks loans, and over Rs 10,000 crore in accumulated losses and unpaid salaries, taxes, and vendor dues.