The Reserve Bank has asked lenders to work out a special concessional package for the crisis-ridden aviation sector, reeling under financial debt burden of staggering 60,000 crore.

In response, banks said they would look into the problems of airlines on case-by-case basis.

The Indian airline industry is facing mounting debts due to the economic downturn and resultant excess capacity, which still exists.

Of late, the industry has been showing signs of recovery, which could gather pace if banks restructure loans.

According to an estimate, the cumulative debt of the airline industry stands at about Rs 60,000 crore. As of March, 2010, Air India had about Rs 40,000 crore debt, while Kingfisher had a debt of about Rs 6,000 crore.

“The RBI has allowed in the case of aviation sector a special concession. Banking industry could on a case-by-case basis, subject to the guidelines and parameters given by RBI, look to see how this industry could be helped by a rescheduling, restructuring…,” State Bank of India Chairman O P Bhatt told reporters on the sidelines of a banking conference in Mumbai on Wednesday.

The RBI had sent a communication to the banks with regard to debt restructuring for airlines in the last week of August.

“We are sensitive to the requirement of the aviation sector and have communicated the same to the banks,” RBI Deputy Governor Usha Thorat said.

While SBI’s aggregate exposure to the aviation sector is about Rs 3,000 crore, Bank of India’s exposure is Rs 4,000 crore.

“Now the discussion is going on amongst the banks’ consortium (how to go about on the recast),” Bhatt said.

Bank of India Executive Director M Narendra said, “RBI has given out some guidelines and we are currently studying and discussing those guidelines within the consortium.”

Major carriers like Air India and Jet Airways want to restructure their debts and have been in talks with banks to get soft loans, instead of the ones with high-interest rates.

Last month, Civil Aviation Minister Praful Patel had said, “The RBI has to come up with guidelines for the restructuring of debt of the aviation sector… In the case of Air India, it (debt restructuring) is very much active on the government’s agenda.”

The aviation sector is a major infrastructure sector and should be treated that way, he had said.

RBI to look into deregulation of interest rate on savings

The Reserve Bank said on Wednesday that it will soon set up a working group to examine the possibility of deregulation of interest rates on savings account.

“Deregulation of interest rate is on our radar. A working group will soon be set up to examine the possibility of deregulating of interest rates,” RBI Deputy Governor Usha Thorat said while addressing a banking conference organised by FICCI and IBA in Mumbai on Wednesday.

“We have to examine whether the de-regulation can help bring more people into the formal banking system,” Thorat said.

At 3.5 per cent per annum, interest on savings accounts is the only regulated rate in the banking system currently and a highly contentious one given its impact on the common man.

For achieving the goal of financial inclusion, there is a need for a higher number of tie-ups between banks and the non-bank finance companies (NBFCs) to have better delivery systems to ensure better last mile connectivity, Thorat said.

Thorat also said that the apex bank is in the process of “tweaking” regulations on securitisation to ensure the growth of the securitised market in an orderly manner.

Banks should also ensure that there is no excessive borrowing, as such borrowings can lead to the formation of bubbles which can deter stability, she said.

Looking at the high growth in credit in recent years, Thorat advised banks to do more “forward looking provisions” to cover their non-performing assets (NPAs) whose increase is “inevitable” in the future.

In her address, Thorat laid a greater stress on rating agencies and asked them to provide “holistic approach” while rating as it has a direct link to the bank’s assets.

She also highlighted the need for development finance institutions to launch more risk mitigant like the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) which offers collateral-free loans for the benefit of small farmers, landless agricultural labourers, those engaged in allied activities related to agriculture and ones affected by natural calamities.