In a sign of a worsening cash crunch, India’s Jet Airways has admitted that it failed to repay a loan installment that was due on December 31.

The country’s second biggest airline by market share announced that it had delayed the payment of a principal installment and interest charges to a consortium of banks led by India’s biggest lender State Bank of India Ltd. The airline is now reportedly in talks with the banks.

This is the first time Jet Airways has defaulted on debt repayments. The loss-making airline had earlier delayed salaries, laid off staff, grounded planes and pruned flights. It also owes money to lessors and vendors. The airline had earlier defaulted on the rental payments on its leased aircraft. Out of its total fleet of 124 aircraft, as many as 108 are on lease.

Jet Airways’ debt default has now invited closer scrutiny by the banks. Under Reserve Bank of India rules, if a company defaults on payments for even a day, banks have to put the account under watch and undertake steps for recovery. If the dues are not cleared in 90 days it will be categorized as non-performing asset (NPA).

According to Jet Airways 2017-18 annual report, the airline owes money to 26 lenders and as of September its debts totaled 82 billion rupees (US$ 1.17 billion). The airline has posted losses in three consecutive quarters

Jet Airways and its second-largest shareholder Etihad Airways, which has a 24% stake, are in talks with bankers about a rescue deal that may involve the Abu Dhabi-based airline increasing its shareholding.

Earlier the Tata Group had expressed interest in buying a stake in the airline, but wanted existing stakeholders, including owner Naresh Goyal, to cede control. This was deemed unacceptable by Goyal.

In 2018 the aviation sector in India was hit by intense price competition, a weak rupee and rising fuel costs. Even InterGlobe Aviation Ltd, which controls India’s largest airline by market share IndiGo, posted its first ever loss in the September quarter since going public in 2015.