CBI is Probing the Role of Top Bankers in Vijay Mallaya Case

CBI is probing the role of top bankers in connection with the loans given by banks to Kingfisher Airlines Ltd (KFAL), promoted by Vijay Mallya.

The agency has written to the consortium that lent to Kingfisher Airlines and a few bankers, including the former chairman of a public sector bank, seeking information and documents. It has also summoned a few bankers for recording their statements, sources said.

The latest investigation was launched after a London court, which is hearing the Mallya extradition matter, asked Indian authorities to explain their case against some of the bankers as it observed that rules were being violated by Indian banks which sanctioned the loans to Kingfisher Airlines.

Apart from this, a report by the government’s fraud office has pointed to the role of bankers in allegedly helping Mallya secure loans despite the weak financials of Kingfisher Airlines. The report suggested that the Central Vigilance Commission, CBI and the Reserve Bank of India (RBI), should “look into the aspect of violations of lending norms, if any, by the banks”.

The investigations by the fraud office has alleged several lapses by the public sector lenders of Kingfisher Airlines and the investment banking arm of a state-owned bank

or instance, the report said the Rs 8,000-crore Debt Recast Package (DRP) for Kingfisher Airlines prepared by the investment banking arm of a public sector bank in 2010 had a “number of shortcomings and flaws in respect of entire preparation of DRP financial projections” and “processing of the proposals by the lending banks.”

It said the DRP “did not carry out any independent viability study of the (financial) projections to ensure that the projections were realistic, just and achievable” and that “the banks also did not critically analyze and consider the various remarks made by the auditors in the audited financials of KFAL as at 31.03.2009” that could affect the financials of the airlines.

It said the investment banking arm of the public sector bank “did not do any due diligence on the valuation of the brand Kingfisher Airlines which was valued at Rs 4111.00 crore at the time of DRP and which formed part of more than 60 per cent of security value offered”.

“Political pressure was brought in to get the postponement of liquidation as well for DRP to be sanctioned. (The) DRP was pushed for consideration by banks at the insistence of top officials from GOI (Government of India) because of influence used by VJM (Vijay Mallya),” said the report.

The report also said that one of the state-owned bank sanctioned a loan of Rs 500 crore to Kingfisher Airlines even as the bank’s credit committee had “pruned down” the proposal for sanctioning the loan to Rs 300 crore. A higher loan was sanctioned to Kingfisher without “any reasonings/ rationale” as the then chairman of the bank “was committed to release Rs 500 crore on account of pressure of the officials of the Ministry of Finance,” the report alleged.

The serious fraud office report has cited another instance where bank documents were changed when a public sector bank lent money. According to the report, the copy of loan documents which were submitted to the probe agency did not have a repayment clause in it for a loan of hundreds of crores. However, it says, when the agency questioned the chairman of the credit committee of the bank, the person produced another copy of the document which had a repayment clause in it.

Kingfisher owes over Rs 9,000 crore to at least 17 lenders, including SBI, IDBI Bank, Punjab National Bank, Bank of India, Bank of Baroda and United Bank of India. Mallya has already been declared as a proclaimed offender by a Prevention of Money Laundering Act, (PMLA) Court. Mallya is currently in the UK battling his extradition.