Kingfisher Airlines bailout buzz makes SBI shares plunge 8 per cent

State Bank of India (SBI) shares plunged over 8 per cent on the bourses on Wednesday amid news that the government-owned bank has agreed to bail out cash-strapped Kingfisher Airlines.

Though SBI has refused to confirm the news under confidentiality norms, sources say it has agreed to lend Rs 1,500 crore to the Vijay Mallya-owned airline to keep the sinking airline afloat.

Shares of the country's largest bank were down 8.11 per cent on the Bombay Stock Exchange at Rs 2,253. The stock traded similarly on the National Stock Exchange, losing 8.33 per cent to Rs 2,248.25.

According to sources, SBI's first tranche of Rs 700 crore will come as short-term working capital to meet the loss-making airline's immediate requirements for paying salaries, tax dues and provident fund payments as well as clearing outstanding arrears of vendors and oil marketing companies.

Additionally, Rs 500 crore will be provided as bank guarantees. Loans worth Rs 200 crore, coming up for repayment shortly, will be rolled over. Further, Rs 150 crore will be provided as guarantees to the income tax department.

The mechanics are unclear whether the latest SBI bailout includes any equity shareholding transfer by Kingfisher.