The decision was taken at a meeting of lenders held in Mumbai to decide on the future course of action to save the beleaguered airline from its current financial crisis.
They have to give us a report on what steps they have taken so far, what challenges they are facing, a senior executive of the State Bank of India told Reuters after the talks between the airline and banks.
The meeting, which ended inconclusively, was attended by most of its creditors and the airline's CEO Sanjay Aggarwal and CFO H G Raghunath, Zee news reported.
The banks had asked the airline to take concrete steps to improve operations and to bring in fresh capital, but the ailing airline failed to give any commitments on fresh fund infusion, local television channels reported.
They will have to come up with concrete steps to improve operations in 15 days, otherwise we will have to take some other actions, the State Bank of India executive, who refused to be named, said.
Seventeen lenders hold 20 percent stake in the airline which has a debt burden of $1.35 billion as of March end.
The lenders said that they had appointed HDFC Securities to value two Kingfisher assets -- Kingfisher Villa with market worth of about Rs 300 million in Goa and Airline House in Mumbai which is worth about 900 million. According to reports, the airlines will have to forego both the properties.
We told them you have to put these on the block and they have agreed. There is no point in keeping non-core, unused assets, the executive said, according to Reuters.
The private airline, promoted by liquor baron Vijay Mallya, has been trying to raise funds to stay afloat in the business, as the mounting debt has pushed it to near bankruptcy. However, the lenders' consortium led by the SBI has been resisting to bailout the airliner unless its promoters agreed to bring in a fresh capital of Rs 20 billion.
Earlier, the debt-ridden airline had made a futile attempt to get foreign fund investment.
Meanwhile, contradicting the media reports that the bankers were liquidating its assets for recovery, Kingfisher told Reuters that the proposal to sell the assets was initiated by the airline itself.
At that time itself, on our own accord, we approached the banks with a proposal to liquidate this unutilized asset and at today's meeting we raised the issue of this pending approval, it said in a statement.
Kingfisher Airlines is running on a contingency schedule, truncating most of its services. Kingfisher, which had been India's No.2 airline till a year ago with more than 60 schedules, is now operating just 14 schedules.
Apart from facing exodus of engineers and pilots, the airline is also in deep trouble as its pilots are protesting against the non-payment of salaries in the last five months.
The airline has defaulted on payments to its vendors, lenders and the tax department and is facing legal action for bounced cheques issued to some of its vendors. According to reports, the lessors took back a number of planes because the company defaulted on lease rentals. However, the company said it had just returned its surplus planes.
In an interesting development, ICICI Bank has offloaded its entire debt in Kingfisher, amounting to Rs. 4.30 billion, to a debt fund promoted by SREI Infrastructure Finance.
There was an opportunity because of the various securities package and returns which were coming along with it, so based on that, the fund saw an opportunity, SREI's vice-chairman Sunil Kanoria said commenting on the purchase of debt.
Star Investments, one of the shareholders in the company, reportedly sold 3.8 million shares for Rs 60 million in open market in April.