In order to refinance its current debt over the near term, according to a report in the Economic Times (ET), Air India would borrow Rs 18,000 crore from the State Bank of India (SBI) and Bank of Baroda (BoB). The loans will be for one year, with the possibility of extended loans down the road for the airlines controlled by the Tata Group.

“Even though they will eventually develop a long-term debt plan, Tatas agreed to extend the current financing arrangement for another year. As a result of the substantial increase in interest rates over the last year, loans are now being offered at greater rates than they were previously “Someone with knowledge of the situation informed ET.

The financial facility that Tata acquired after purchasing Air India would be continued by these loans. Since the airlines obtained loans from SBI and BoB in January 2022, the Reserve Bank of India has increased the repo rate by 225 basis points, which would result in higher interest rates. At an interest rate of 4.25 percent, Air India borrowed loans from the SBI and BoB totaling Rs 10,000 crore and Rs 5,000 crore, respectively. The new interest rate is anticipated to be 6.5%.

Along with overhauling Air India’s operations, the Tata Group is also attempting to merge its different subsidiaries, such as AirAsia India and Vistara. Singapore Airlines and the Tata Group jointly own Vistara.

“The group’s future plans for Air India depend on the completion of the merger formalities since that is when the kind and quantity of the cash would be clear. Therefore, banks will be anticipating receiving a share of this highly rated corporate loan later in 2023 “Another individual with knowledge of the situation informed ET.