The public sector lender’s exposure to the struggling airline, including government-guaranteed emergency credit, is estimated to be over Rs 2,000 crore
The Central Bank of India classified Go First’s loans as non-performing assets in the second quarter of fiscal year 2023-24. The carrier has been insolvent since May 2023 and suspended operations on 3 May of this year.
The public sector lender’s exposure to the struggling airline, including government-guaranteed emergency credit, is estimated to be over Rs 2,000 crore. Aside from the Central Bank of India, Bank of Baroda is another state-owned lender with significant exposure to Go First.
During an analyst call for Q2, executives from the Central Bank of India indicated that the bank had previously taken provisions in the standard asset category for one large corporate account (Go First) owing to anticipated future issues (stress). Because the corporate account was now classed as NPA, the provision resulted in a write-back, resulting in a full provision on that account.
The bank paid tax on the provision (about Rs 600 crore) for this account in the April-June quarter of FY24, recognising it as a regular asset. With a provision of roughly Rs 2,000 crore as an NPA, the bank witnessed a write-back of Rs 43 crore, according to bank executives.
This account is classified as a sub-standard account per provisioning regulations, meaning that it has been nonperforming for less than or equal to 12 months. Although the provisioning obligation for sub-standard accounts might range between 5 per cent and 25 per cent of the exposure depending on the nature of the credit facility, the Central Bank of India elected to make a full provision for airline accounts.