A spokesman for the airline said it was not yet decided how big a stake the banks will own.


Earlier this year, lenders to private sector rival Kingfisher Airlines took a stake in the loss-making carrier controlled by liquor baron Vijay Mallya.


A consortium of Air India's lenders last month gave broad approval to its financial restructuring, a source had told Reuters, providing relief for the cash-strapped airline reeling under $4 billion of debt.


Air India's lending group has 26 banks. In addition to State Bank of India, IDBI and Bank of Baroda also have heavy loan exposure to the airline.


The restructuring plan must be approved by the federal government before it is implemented.


India's airlines are struggling with surging oil prices, high sales tax on jet fuel and below-cost pricing driven by fierce competition, leading to losses for most of them.


Indian airlines are forecast to lose up to $3 billion in the fiscal year that ends in March 2012. State-owned Air India, operating on government life support, is expected to account for more than half of that, the Centre for Asia Pacific Aviation (CAPA) has said.


Air India said its passenger revenue rose 12.3 per cent in November, compared with the year-ago period, and domestic load factor stood at almost two-thirds of its total capacity.


Kingfisher in March issued shares equivalent to 23.4 per cent of the airline to a consortium of 13 banks, also led by State Bank of India, after conversion of compulsory convertible preference shares at Rs 64.48 a share. The stock closed on Thursday at Rs 21.25.