The restructuring of banks' loans to troubled airlines, which the Reserve Bank of India (RBI) has allowed, is taking its time.
The banks are seeking greater concessions from RBI than it has authorised in the first instance.
Under normal circumstance, such restructuring will result in these loans initially being classified as non-performing assets, requiring higher provisioning. This will obviously impact banks' bottom lines.
Banks are seeking this round of restructuring along the same terms as the one RBI allowed last year as a general response to the economic downturn. But the regulator's attitude seems to be that the earlier dispensation was an exceptional measure required by exceptional circumstances.
Today, not only is the Indian economy again on a healthy growth path, the airlines' fortunes are also looking up, as are banks' balance sheets. Hence a second relaxation, that too for a particular industry, does not seem to be justified.
In the first place, not all airlines are in trouble and not all banks have an exposure to the troubled ones. The affected airlines are particularly those whose business model, offering full services, has been found to be wanting.
One low-cost airline, SpiceJet, has recently changed hands on very favourable terms.
Another, IndiGo, is contemplating making a maiden public issue, taking advantage of both its health and the buoyancy in the IPO market. In the circumstances, it is difficult to consider the restructuring needs to be generic, requiring the banking regulator to relax rules that have been put in the first place to ensure that banks classify assets correctly and transparently.
Without the additional provisioning, the relevant banks' balance sheets will, to that extent, appear rosier than what they actually are. Bank shares have recently been on a roll and there can be no reason for arguing that they need to dress up their balance sheets better to win greater investor favour.
As for the concerned airlines, the logic for granting them special relaxation is even weaker. Among them, Air India, government-owned and the biggest borrower, is in a unique category.
Paramount, the smallest in the group, has lost aircraft due to non-servicing of lease arrangements and is looking at bringing in capital from group companies.
As for Kingfisher, the one in the greatest need of restructuring, its current problems are directly proportional to its earlier extravagance and ambition. At one stage it had placed orders for as many as 10 A380s, the largest commercial airliner in the world, when no other Indian airline had done so!
There is no reason why the group, with its interests in cash cows like liquor, should not be able to bring in the equity needed to reduce debt, make debt-servicing manageable and qualify for debt restructuring.
There is no reason for the system to let these firms off the hook. Ever since the domestic US commercial air travel market was deregulated over two decades ago, its runway has been strewn with the wreckages of ventures that have lost their earlier identities. Nobody questions whether the deregulation has been good for travellers or not.