FtrstBiz 9 Aug 2014
Years after it emerged that the state-owned lender IDBI Bank gave a flagging Kingfisher Airlines loans amounting to Rs 900 crore despite internal reports advising otherwise, the CBI has reportedly registered a preliminary enquiry against the bank to investigate why it allocated the funds.
According to a CNBC-TV18 report, the investigating agency has registered a preliminary enquiry against the lender to investigate why the money was allocated to the airline despite internal reports in the bank stating it was inadvisable to lend the money.
A report in the DNA said the investigating agency had sent a questionnaire to the bank regarding the allocation of the loans but wasn't satisfied with the replies it received and it is hoping to receive other files pertaining to the case from IDBI Bank after the registration of the preliminary enquiry.
The next stage in the investigation would be the registration of an FIR if any criminality is established during the investigations.
A CNN-IBN report in 2011 had highlighted how the internal reports of the IDBI Bank in 2009 had raised questions about the wisdom behind granting loans to the flagging airline.
The report, prepared when Kingfisher Airlines had sought a loan of Rs 150 crore for six months, says: "The company's financial position is unsatisfactory as reflected by substantial gross loss and net loss during FY 09 and accumulated losses, eroded net worth and high debts. As on March 31, 2009, debt levels to the tune of Rs 5665.55 crore indicating a major risk burden on the banking system. Final conclusion, proposal doesn't comply with minimum internal credit rating."
However, despite the report, the loan for the airline was approved and another proposal from the airline seeking a loan of Rs 750 crore was also approved despite an adverse report.
"Since 66 per cent of promoters shareholding are pledged, continuance of promoters in the company needs to be ascertained. High debts, no guarantee of repayment of loans and final conclusion was the same that loan request doesn't comply with minimum internal credit rating," the bank's report had stated.
The CBI is also already probing the loans granted by the State Bank of India to the airline, which has been out of operation since 2012.
Banks' loans to big corporates have been hogging the limelight of late after the CBI arrested state-run Syndicate Bank's chairman and managing director SK Jain for taking Rs 50 lakh bribe to extend credit facilities to private sector companies Bhushan Steel and Prakash Industries.
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