Air India, which is under a debt of almost Rs 55,000 crore, is expected to seek bids from lenders to borrow Rs 500 crore, thus exhausting its government guarantee of Rs 2,000 crore. The remaining Rs 1,500 crore government-backed loan was taken by the airline last month from Bank of Baroda to regularise its accounts in order to prevent them from turning into NPA as per the new guidelines put out by the Reserve Bank of India on February 12.

“With the February 12 circular, even a day of delay in payments after 180 days is considered as NPA. Interest became due on March 1 and if we didn’t clear the dues by August 27, then they are also required to take you to the NCLT (National Company Law Tribunal). But government has already said it will not let Air India’s accounts be written off,” a senior Air India official told The Indian Express, adding that prior to the circular, the airline was late on its payments by 30-60 days. Due to the devaluation of the Indian rupee, Air India has ruled out borrowing in foreign currency. “We would have to borrow at Rs 65 per dollar and repay at Rs 73 per dollar along with the interest,” the official said, explaining the rationale behind the airline looking solely at domestic lenders for the fund-raise.

Tuesday, Civil Aviation Secretary RN Choubey had told reporters that there was no such danger of Air India’s loans turning into non-performing assets (NPAs) and that vendor dues were taken care of. “Air India has had discussions with suppliers and vendors and has sorted out those issues, based on the cash flows,” Choubey had said.

The fresh Rs 500 crore will be utilised in meeting the immediate working capital requirements as well as repaying part of the interest on government guaranteed non-convertible debentures of Rs 7,400 crore.

“The NCD interest of Rs 2,100 crore is due on September 20,” the official said, adding that the government also infused Rs 980 crore as equity in to the company last Friday. These funds were part of an infusion of Rs 30,231 crore over a period of nine years as part of the turnaround plan approved in 2012. With this amount, Air India has received about Rs 29,730 crore, or 98 per cent, of the equity promised under the turnaround plan.