India's State Bank to bail out Kingfisher: report

India's State Bank of India has decided on a 16.5 billion rupee ($334.62 million) loan package to help troubled Kingfisher Airlines overcome a cash crunch, a local newspaper reported on Wednesday.

The newspaper quoted an unidentified source as saying the state-controlled bank had decided to extend a new line of credit, that included 7bn rupees in short-term working capital and 5bn rupees in bank guarantees.

It has also decided to extend the tenure of current loans to the airline worth about 2.5-3bn rupees that would have been due next year, the newspaper said.

State Bank or another government bank, Punjab National Bank , could offer bank guarantees of 1.6-2bn rupees to tax authorities, it said.

State Bank and Kingfisher officials were not immediately available for comment.

The airline has become one of the main casualties of high fuel costs and a fierce price war between a handful of budget carriers which, between them, have ordered hundreds of aircraft for delivery over the next decade in an ambitious bet on the future.

Kingfisher shares plunged nearly 20 per cent in intra-day trade on Tuesday but recovered to close 0.4 per cent up as rumours of the bank bailout spread. India's aviation regulator said the airline had given an assurance that bank funding was on the way.