Six banks write to regulator against Paramount relaunch

Half a dozen lenders have asked the aviation regulator not to let Paramount fly again till it clears Rs.550 crore in dues
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First Published: Mon, Feb 18 2013. 12 52 AM IST
M. Thiagarajan, chairman of Paramount, which shut shop under financial duress in 2010, had met India’s director general of civil aviation in January to restart the regional airline that operated in southern India. Photo: Mint
M. Thiagarajan, chairman of Paramount, which shut shop under financial duress in 2010, had met India’s director general of civil aviation in January to restart the regional airline that operated in southern India. Photo: Mint
Updated: Mon, Feb 18 2013. 12 37 PM IST
New Delhi: After a consortium of state-owned banks decided to recall loans given to Kingfisher Airlines Ltd, half a dozen lenders have asked the aviation regulator not to let Paramount Airways Pvt. Ltd fly again till it clears Rs.550 crore in dues.
M. Thiagarajan, chairman of Paramount, which shut shop under financial duress in 2010, had met director general of civil aviation Arun Mishra in January to restart the regional airline that operated in southern India.
Mint has reviewed letters from Bank of India (BoI) dated 7 February, State Bank of India (SBI) on 19 January, Central Bank of India on 2 February, Indian Bank of 1 February, and a recent one by IDBI Bank Ltd that ask Mishra not to allow the airline to restart till debts to the state-owned lenders are cleared.
“In 2006, IDBI Bank Ltd sanctioned fund-based and non-fund-based working capital limits to the tune of Rs.50.42 lakh for which IDBI is having the first charge on the current assets of the company,” chief general manager, recovery, Salila George, IDBI Bank, wrote in the letter. “Other lenders and bankers who had assisted PAPL (Paramount Airways) are Indian Bank (Rs.31.5 crore), Bank of India (Rs.227.5 crore), SBI (Rs.84.8 crore), Andhra Bank (Rs.41.5) crore and Central Bank of India (Rs.30 crore). The total exposure of PAPL by all the lenders is approximately Rs.550 crore.”
IDBI Bank and the other four banks have requested the regulator in separate letters that it should not consider the airline’s fresh proposal till the loans are repaid.
Thiagarajan did not answer phone calls seeking comments. An email and text messages remained unanswered.
Meanwhile, state-run fuel marketer Hindustan Petroleum Corp. Ltd has also complained to the aviation regulator that the airline still owes it money for fuel supplied till 2010 to its Embraer aircraft. Hindustan Petroleum has filed civil and criminal lawsuits in a Chennai court to recover dues, R. Radhakrishnan, general manager, aviation, wrote in the 4 February letter.
Paramount’s case is similar to Kingfisher, which owes a large sum of money to government-owned banks that have already taken a haircut in the past to keep the airline afloat. The exposure of public banks to the grounded airline is some Rs.6,360 crore, and once unapplied interest is added, this rises to Rs.7,000 crore.
Mohan Ranganathan, a aviation safety consultant and member of the government-appointed civil aviation safety advisory committee, said neither airline “has shown basic aviation management skills. No sensible bank will lend money nor will leasing companies provide aircraft to them. Both airlines’ owners have no credibility left”.
SBI, the leader of a lenders’ consortium, has the maximum exposure to Kingfisher at Rs.1,600 crore, followed by Punjab National Bank (Rs.800 crore), IDBI Bank (Rs.800 crore), BoI (Rs.650 crore), Bank of Baroda (Rs.550 crore), United Bank of India (Rs.430 crore), Central Bank of India (Rs.410 crore), UCO Bank Ltd (Rs.320 crore), Corporation Bank (Rs.310 crore), State Bank of Mysore, an SBI associate bank (Rs.150 crore), Indian Overseas Bank (Rs.140 crore), Federal Bank Ltd (Rs.90 crore), Punjab and Sind Bank (Rs.60 crore) and Axis Bank Ltd (Rs.50 crore).
“This shows banks are coming under increasing pressure to recover their dues by the finance ministry ahead of the budget session that starts from next week,” said a Kingfisher official who declined to be named.
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First Published: Mon, Feb 18 2013. 12 52 AM IST
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