Air India asks lenders to cut interest rates on loans

Saddled with total debt of around Rs 46,000 crore, Air India has written to 16 of its lenders to cut interest rate on its loans by up to 2 percentage points, in line with the reduction in rates in the market. The airline is also in talks with state-owned infrastructure company NBCC and Ministry of External Affairs to sell around 98 of its properties spread across India and some overseas. While reduction in interest rates reduce its costs, monetisation of assets would help pare it short-term borrowings.

If bankers accept its request, it would bring down its interest cost to around 8.5 per cent from over 10 per cent at present, a senior Air India official said. “This would result in annual savings in interest costs of about Rs 200 crore on loans of around Rs 15,000 crore. We have written to around 16-17 banks and to the consortium leader State Bank of India. The banks have so far not responded and they usually take their time,” the official said.

The airline has asked the banks to align the rates on loans to the marginal cost of funds based lending rate (MCLR) plus a reasonable spread not exceeding 50 basis points. This is expected to lower interest rate which is presently linked to the base rate. Base rate, which is based on average cost of funds, for banks is typically higher than the MCLR. SBI’s one-year MCLR for instance is 8 per cent, compared with a base rate is of 9.10 per cent.


Read more: The Indian Express