State Bank of India has decided on a Rs 1,650 crore loan package to

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help troubled Kingfisher Airlines overcome a cash crunch, a daily newspaper reported today.

The newspaper quoted an unidentified source as saying the state-controlled bank had decided to extend a new line of credit, that included Rs 700 crore in short-term working capital and Rs 500 crore in bank guarantees.

It has also decided to extend the tenure of current loans to the airline worth about Rs 300 crore that would have been due next year, the newspaper said.

State Bank or another government bank, Punjab National Bank, could offer bank guarantees of Rs 160 crore 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% in intra-day trade on Tuesday but recovered to close 0.4% 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.