State Bank of India, the largest lender to the debt-ridden Kingfisher Airlines, is expected to get board approval this week to issue a loan recall notice to the beleaguered airline.
“The process starts on Monday. We will most likely get board approval this week or latest by next week,” said Shyamal Acharya, deputy managing director at SBI.
SBI is the lead banker of the 17-lender consortium, which has an exposure of about Rs7,000 crore to liquor baron Vijay Mallya’s defaulting airline, as of December 31, 2012.
Within this, SBI has maximum exposure of over Rs1,600 crore.
Kingfisher, which has been grounded for more than four months, has been unable to obtain clearances to fly again and has also failed to get fresh capital from foreign airlines like Etihad Airways.
The airline lost its flying licence last year, with the scheduled operator permit – temporarily suspended by the Directorate General of Civil Aviation in October following a strike by its pilots and engineers over non-payment of salaries for several months that completely grounded its fleet – expiring on December 31.
In the latest blow, the government last week withdrew all domestic and international flying slots of the grounded carrier – working out to around 25,000 seats – with immediate effect and decided to allot them to other Indian airlines. These included around 126 slots for international flights to eight countries.
Acharya said the consortium expects to send the loan recall notice to Kingfisher by this month end, and has also hired a law firm to assist it in the legal battle.
Acharya refused to disclose the name of the firm but said he is going to meet
the firm soon to seek legal options for recovery.
Acharya said the consortium can invoke provisions under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities (Sarfaesi) Act or sell the pledged United Spirits shares.
The Sarfaesi Act allows the lender to sell the defaulter’s assets without requiring a court order.
“Recalling loans is the only option left with the consortium. But I don’t expect Kingfisher to be responsive,” said Acharya. “We have a strong case and it is going to be a long fight ahead.”
Kingfisher officials declined to comment.