KFA-like casualties happen, but there is a way to deal with them

A report in Business Line offers a peek into the minds of Kingfisher lenders.

Oriental Bank of Commerce CMD SL Bansal has said banking is “a business of taking risks”. “If you don’t take risks, what is the intermediation (part a bank plays),” he asks.

He expects his bank to recover its loan to Kingfisher as it is a guarantee towards aircraft delivery and not for working capital.

The bank has Rs 55 crore exposure to Kingfisher Airlines, which is still standard, as the company has paid interest until June, the report said.

And if the airline does not take the delivery from Airbus, the bank will get back the amount, with “some penalty”, he has said.

[caption id=“attachment_502133” align=“alignleft” width=“380”]  With the crisis continuing at Kingfisher, Aviation Minister Ajit Singh is planning to meet the ground handling staff of the airline today[/caption]

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He also says that “such casualties are bound to happen, because the economy is not doing well”.

Are these views a perfect recipe for more Mallya-like disasters in India?

On could presume it is, especially if this holds a mirror to other lenders’ thoughts. Especially, since this has been the attitude of all the authorities concerned, in the case of Kingfisher.

Also consider the “small penalty” Oriental Bank may have to pay if Kingfisher is not taking the delivery.

Isn’t he forgetting that penalty, even if it is small, matters, especially when taxpayers’ money is involved?

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For Oriental Bank, the exposure is mush less. But there are others with huge advances to Kingfisher. According to a PTI report, State Bank of India has the single largest exposure with Rs 1,580 crore, followed by IDBI Bank (Rs 720 crore), Punjab National Bank (Rs 435 crore), Bank of India (Rs 575 crore), Bank of Baroda (Rs 530 crore), Central Bank of India (Rs 420 crore), UBI (Rs 350 crore), Corporation Bank (Rs 150 crore), and Federal Bank (Rs 80 crore which is not a loan but an en-cashed bank guarantee to BPCL).

Considering this huge amount, isn’t it complacency for a lender to pass such comments, that too when Mallya is playing cat-and-mouse game with everybody concerned?

Minister to meet staff: With the crisis continuing at Kingfisher, Aviation Minister Ajit Singh is planning to meet the ground handling staff of the airline today, the Times Now TV channel reported.

However, the minister told the channel that the issue with the airline is not only the staff salary as it has huge amount of dues with others, like the Airports Authority, oil companies and lenders.

The company has reportedly dues worth over Rs 13,000 crore to various parties.

The minister also said getting an international airlines company to invest in Kingfisher is a difficult proposition but not an impossible one.