Air India Secures Rs 14,000 Crore Loan From SBI & BOB

Air India obtained a loan from the State Bank of India (SBI) and Bank of Baroda (BOB) for Rs 14,000 crore  to pay its debt and satisfy working capital needs.

The national carrier of India, Air India, has obtained a loan from State Bank of India (SBI) and Bank of Baroda for Rs 14,000 crore ($1.9 billion) (BOB). 

The airline will use the financing to pay down its current debt and to cover its working capital needs.

The government’s plan to privatize the faltering airline includes the financing. 

Together with its low-cost subsidiary Air India Express and a 50% investment in ground-handling firm Air India SATS Airport Services Private Limited, the government is looking to sell 100% of Air India.

The COVID-19 outbreak is only one of the factors that have slowed down the government’s attempts to sell Air India over the past few years.

 The airline has been losing money for more than ten years and owes more than Rs 60,000 crore ($8.2 billion) in debt.

The loan from SBI and BOB will assist Air India in lessening its debt load, which is one of the main reasons why prospective investors have been hesitant to participate in the airline. 

As part of the privatization process, the government has additionally stated that it will assume a sizable percentage of the airline’s debt.

The pandemic has had a significant negative impact on Air India, with both domestic and international travel being severely curtailed. 

The airline has been running at a reduced capacity, which has had a severe negative impact on its income. 

The airline would receive the much-needed liquidity from the loan from SBI and BOB, enabling it to meet its operating and capital expenditure needs.

The government’s disinvestment plan, which seeks to raise Rs 1.75 lakh crore ($24 billion) by selling its ownership in several public sector enterprises, includes the privatization of Air India as a significant element.

By the end of the current fiscal year, which ends on March 31, 2023, the government hopes to have privatized Air India.

Overall, Air India will benefit from the loan from SBI and BOB since it will allow the airline to lower its debt load and strengthen its financial position. 

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Investors will be closely monitoring the privatization process, and it is unclear if the government will be able to find a reliable buyer for the troubled airline.