CBI names 5 IDBI Bank executives in Rs 950 cr loan misuse case by Mallya

It says there was a slew of meetings between Mallya and key bank executives as the Kingfisher Airlines was going under

Five serving and former executives of the IDBI Bank, mentioned in a probe report by the Central Bureau of Investigation (CBI) will be questioned by the Enforcement Directorate (ED) over a Rs 950-crore loan sanctioned to Kingfisher Airlines in 2009.

Yogesh Agarwal, the then chairman and managing director of IDBI Bank, and four other executives who were members of the credit committee, B K Batra, O V Bundellu, R Bansal and S K V Srinivasan, have been named by the CBI.

The report points out the loan was misused by Vijay Mallya and was diverted abroad on false claims. It also says there was a slew of meetings between Mallya and key bank executives as the Kingfisher Airlines was going under.

The CBI has shared its findings with the ED, which recently filed a case against Mallya, Kingfisher Airlines and IDBI Bank executives.

"The Enforcement Directorate is examining the information provided by the CBI and will soon question the respective entities and their roles in the matter," a source close to the development told Business Standard.

The report states that loans were sanctioned and disbursed by IDBI Bank to Kingfisher Airlines at various times in 2009.

The proposal for the sanction of a corporate loan of Rs 950 crore was submitted by A Raghunathan, CFO, Kingfisher Airlines, and was marked for the attention of Batra, said the CBI report.

Raghunathan referred to a meeting between Mallya and Agarwal in a letter dated October 6, 2009, and requested the bank to lend the airline Rs 150 crore for six months to pay overseas vendors.

A memorandum was put up to the credit committee and the loan was sanctioned, despite the company having a negative net worth and not satisfying the corporate loan policy of the bank, said the report. The credit committee comprising Batra, Bundellu and Bansal sanctioned the loan on October 7, 2009.

Raghunathan, again referring to Mallya's meeting with Agarwal, also sought an ad hoc release of Rs 200 crore. The proposal was put up to the corporate banking head, Batra, who recommended that the bank's chairman and managing director could approve it.

A few days later, on November 4, IDBI Bank sanctioned a short-term loan of Rs 200 crore, subsumed in the total loan. The sanction came from Yogesh Agarwal.

These loans were disbursed while the original proposal for a corporate loan of Rs 950 crore was pending. This proposal was put up again before the credit committee on November 19, 2009.

On November 27, IDBI Bank released a corporate loan of Rs 750 crore, which was sanctioned by Bundellu, Batra and Srinivasan.

Pointing to Agarwal's role the CBI said, "He approved the proposal while instructing for expediting the ratings though the auditors of the company had observed that funds aggregating to Rs 4,630 crore raised on short-term basis were used for long-term purposes. Undisputed TDS amount of Rs 100 crore plus was not deposited for over six months and the ratings were not available."

The CBI observed that the loans were approved by accepting as security the hypothecation and assignment of the Kingfisher brand, finance lease aircraft, a corporate guarantee from United Breweries Holdings and a personal guarantee from Mallya.

Responding to an email query, the IDBI Bank spokesperson said, "IDBI Bank has sanctioned loans to Kingfisher Airlines after following guidelines. The bank is cooperating with the CBI and has provided all information sought."

The CBI also said Rs 263.48 crore of the loan disbursed by IDBI Bank was transferred to Kingfisher Airlines' accounts in Axis Bank (Rs 169.62 crore), ICICI Bank (Rs 39 crore) and Bank of Baroda (Rs 54 crore), from where funds were transferred to other Kingfisher Airlines accounts.

This Rs 263 crore was never used for the purpose it was sanctioned by IDBI Bank: to meet obligations to overseas vendors. The report also provides a break-up of amounts used for other purposes.

Another Rs 200 crore was used to repay the Rs 200 crore loan sanctioned by IDBI Bank.

"A major chunk of the funds transferred to Axis Bank were used for foreign remittances towards lease rentals, purchase of aircraft parts, etc. Since these remittance have gone outside the country, further inquiry can only be made by sending Letters Rogatory for foreign investigation," The CBI report said.

"We are probing the larger aspect of the loan scam," a source in the Enforcement Directorate said. "Apart from IDBI Bank, the Rs 336 crore sanctioned by Union Bank of India (UBI) was withdrawn and deposited in another account with a private bank. This was also against the rules," he added.

"We are in the process of listing Mallya's properties in India and overseas to initiate legal procedures for attachment," the source said.