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Kingfisher Airlines, which was supposed to pay at least its interest dues to lenders by November 30, has failed to do so rendering the account a potential non-performing asset (NPA) for banks.
The 90-day limit to pay at least the interest dues ended by the close of banking hours on Wednesday.
An account becomes an NPA if interest is not paid for one quarter. With system-driven NPA recognition in place, the account will turn an NPA automatically on the 91{+s}{+t} day. According to an official of a public sector bank, which is among the lending consortium, “since the airline did not service its interest dues on Wednesday”, the account would now become a non-performing asset for the lender banks if the company does not clear its interest dues by December 31, when banks close their profit and loss account for the third quarter.
However, lender banks will not be impacted much if the company pays the entire overdue amount before the end of the third quarter. “Converting any account which has become an NPA is possible if the company pays up the entire overdue amount,” pointed out a top official of another lender bank.
The impact will be seen only during the third quarter performance report; “but if the account is cured before December 31, then it will not reflect on our profit and loss account,” the official explained.
To hit further funding
The company's failure to pay up its interest overdue could have a bearing on its request for further funding from banks. Recently, top company officials had asked banks for further funding of Rs 700-800 crore towards working capital requirements. The company has also hired SBI Caps to assess its business and recapitalisation needs.
The official pointed out that even though the company has asked for further funding, “until the account is regularised by promoters bringing in their own stake, we wouldn't be able to go ahead with the request”. He also said that auditors of some of the lender banks were also “pitching for downgrading of the account” in view of the financial problems the company has been facing for sometime now.
Another banker pointed out that the auditors' call for downgrading could have risen from the inherent weakness of the account. He said this was despite the fact that the company has been clearing its interest dues, so far, without delays.
The Reserve Bank of India, the last time over, intervened and gave a special dispensation for the airline's debt restructuring, he pointed out.
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