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IDBI Bank’s Kingfisher Airlines loan under CBI scanner

The Central Bureau of Investigation (CBI) on Saturday began probing loans by IDBI Bank to liquor baron Vijay Mallya’s Kingfisher Airlines that went bad.

“We usually try to wrap up a preliminary inquiry within three months. The next step is to register a case,” said a CBI official who did not wish to be named.

The agency last week blew the lid off a bribery scandal at another state-owned bank, Syndicate Bank, involving its chairman and managing director S K Jain, Bhushan Steel’s vice-chairman & managing director Neeraj Singhal, Prakash Industries’ chairman Ved Prakash Agarwal and seven others.

CBI will investigate IDBI Bank’s Rs 950-crore loan to Kingfisher Airlines, despite the airline’s negative net worth and credit rating at the time it was sanctioned.

“There was no need for the bank to take the exposure when other banks’ loans (to the airline) were getting stressed,” the CBI official said.

“Along with other lenders to Kingfisher Airlines, CBI also asked us for details about the loan account. Most of the information has already been furnished. A few documents will be handed over to agency in the next few days,” said a senior IDBI Bank executive who did not wish to be named.

The loan was a commercial decision by a committee of executives, he said, adding the view then was that Kingfisher Airlines was good for credit. Later, the loan was treated as a dud and the bank made suitable provisions, he pointed out.

A consortium of lenders to the grounded airline decided to recall their loans in February last year when Rs 2,400 crore became overdue.

“We have not received any communication and are unaware of any such inquiry,” Kingfisher Airlines said in an statement.

The CBI is probing 30 cases of bad loans by state-owned banks after the finance ministry and the Reserve Bank of India raised concerns over the rise in dodgy lending. Banks with the most shaky loans are State Bank of India, Punjab National Bank and Central Bank of India.

Mallya sold a 27 per cent stake in the country’s biggest liquor company, United Spirits, to Diageo for Rs 6,500 crore last year, but that money was not used to repay Kingfisher Airline’s debt. The 14 banks that had lent to the airline are fighting suits by Mallya in several courts.

Kingfisher Airlines took off well in 2005. But a Rs 550-crore deal in 2007 to buy budget carrier Deccan Airways and sundry other mistakes pulled it down. Mallya owes money to banks, employees, caterers, aircraft leasing companies, fuel supplier Hindustan Petroleum Corporation and even taxi operators.

In a controversial decision in November 2010, the lenders’ consortium converted a portion of the Rs 7,650-crore due from Kingfisher Airline into preferential shares.

The banks announced a two-year holiday for repayment and reduced the interest rate. After the restructuring, the airline’s debt fell to Rs 6,300 crore.

By December 2011, State Bank of India said Kingfisher Airline’s loans had turned bad. The bank had Rs 1,500 crore due from the airline. Other banks in the consortium followed their leading lender.

Last month, Kingfisher Airlines withdrew an appeal in the Supreme Court against the sale of its Mumbai office.


  • Nov 2010: Banks restructure Rs 7,500 crore of loans given to Kingfisher Airlines; a portion of the loan is converted into equity, fresh funding is granted and repayment term extended
  • Jan-Mar 2012: Banks begin to declare KFA loans as non-performing assets after the airline fails to service interest
  • Oct 2012: Kingfisher shuts operations
  • Mar 2013: Lenders sell pledged shares of United Spirits and Mangalore Chemicals and Fertilisers Ltd
  • Apr 2013: Kingfisher moves the Bombay HC against sale of shares, does not get any relief
  • May 2013: Lenders recall all of Kingfisher’s Rs 6,000-crore loan
  • Apr 2014: Lenders put Kingfisher Airlines brand for sale; find no takers
  • May 2014: United Bank of India slaps a wilful defaulter notice on KFA Chairman Vijay Mallya
  • Jul 2014: Kingfisher withdraws its Supreme Court appeal against the Karnataka High Court verdict allowing lenders to take possession of its Mumbai office


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