Mumbai: In the absence of general guidelines from the Reserve Bank of India (RBI), State Bank of India (SBI), on behalf of the lenders’ consortium, has sought special permission from the central bank for conversion of debt into equity in Jet Airways (India) Ltd. This comes after the Supreme Court quashed the RBI’s 12 February circular allowing such conversions in companies with negative net worth.

SBI, on behalf of the lenders’ consortium, had earlier proposed to convert the airline’s debt into equity for a notional value of₹1 for a 51% stake in the distressed company.

This move was based on RBI’s circular which the Supreme Court declared ultra vires.

SBI is yet to go ahead with the conversion as it is awaiting revised guidelines from RBI.

Queries emailed to SBI were unanswered.

“We will convert debt into equity only if the bidders want to pick up 75% stake in the company. As of now, the lenders can sell only 32% of the airline shares that are pledged with them,” said a banker aware of the development. “However, we have sought special permission from the central bank for converting the existing debt into equity to meet the difference.”

On Wednesday, banks rejected Jet Airways’ proposal for emergency funding of ₹400 crore, resulting in its grounding.

The interim funding was supposed to help the airline keep at least some of its planes flying till the lenders found a buyer. Lenders, however, felt that they could not put in additional funds unless there was some clarity on cash flows.

The proposal for emergency funding and picking up a 51% stake in the airline was part of the resolution plan put forth by lenders.

In March, lenders committed to infuse ₹1,500 crore, conditional on promoter Naresh Goyal resigning from the board. Even with Goyal’s exit, however, the lenders still did not release the promised additional funds.

The resolution plan to turn around the airline is currently in abeyance as a bidding process is underway.