Credit rating agency Moody’s Investor Services has warned that if Air India defaults it will impact the rating of Indian lenders, including SBI, Punjab National Bank, Bank of Baroda, Bank of India, IDBI Bank, Central Bank of India and Oriental Bank of India. These firms account for 70% of Air India’s total borrowings.
"Recurring defaults by the airline imply that government support may not be timely, which is credit negative for Indian banks," Moody’s said in a statement on Monday. "Also, the support was delayed and inadequate in our view as the government allowed the airline to delay paying employee salaries and bank interest. This poses concerns and raises doubts over its willingness to provide timely support to sovereign-owned PSU enterprises.