MUMBAI, February 20: Air-India is raising $46.5 million (about Rs 180 crore) FCNR(B)) loan from the State Bank of India for wet leasing six aircraft to transport Haj pilgrims from India to Jeddah, Saudi Arabia.The nine-month facility will carry an interest rate of 1.25 per cent (125 basis points) over Libor. This is the first instance of Air-India raising short-term FCNR(B) loans to wet lease aircraft to ferry Haj pilgrims.
Banking sources said the facility has been extended on the basis of the government of India's comfort letter. The government will be responsible for repaying Rs 100 crore worth of loan while the rest will be taken care of by the Haj Committee.
The receivables from the committee and the government have been kept as collateral, sources said.
"At a time when corporates are pre-paying FCNR(B) loans as the forward premia are on the rise, Air-India accessing the loan is significant," an industry analyst pointed out.
Rising forward premia has taken the shine off from the FCNR(B) loans.The recent turmoil in the forex market and the shooting of forward premia have forced a majority of corporates to shift to domestic borrowings. With six-month forward premia ruling over 15 per cent (on Friday), those corporates which have no export earning are finding FCNR(B) loans much costlier than domestic loans.
"Those who have already taken the loans want to prepay; those who have planned to raise FCNR(B) funds are not raising it and instead opting for rupee funds," a senior banker said.
Some of the public sector banks have, in fact, closed the FCNR(B) window. "We do not want to take any chances. In a highly volatile market, if the non-resident Indians suddenly lose confidence in Indian financial system and start withdrawing FCNR(B) accounts, it will be difficult for us to prepay funds. Hence, the decision is not to deploy FCNR(B) funds in domestic market," one senior banker said.
Most of the public sector banks which have access to FCNR(B) funds are now keeping it abroad deploying in overseasmoney market at a lower yield.
Air-India has wet leased two 299-seater Lockheed 1011s, two 309-seater L1011-500s and two 480-seater Boeing 747-200s. The $27 million worth of lease rentals will be paid in nine instalments, sources said.
Air-India's decision to wet lease aircraft to transport Haj pilgrims is significant as last year it deployed its own fleet for the purpose which threw out of gear its flight schedules leading to a spate of cancellations of flights.
The worst-affected was the Mumbai-Frankfurt service and the German tour operators launched a tirade against Air-India for cancellation of services.
In the face of the strong criticism, Air-India decided to go for wet leasing of aircraft this year to avoid any disruption to the airline's scheduled services.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
