The Enforcement Directorate (ED) has alleged that five current and former bankers with IDBI Bank “knowingly assisted and conspired” with the now-defunct Kingfisher Airlines and its chairman Vijay Mallya in “cheating” IDBI Bank. According to the ED complaint accessed by The Indian Express, IDBI Bank sanctioned loans to Kingfisher Airlines in 2009, “against the established banking norms and regulations,” therefore leading to “generation of proceeds of crime” in the case.
The five IDBI Bank officials who have been named as co-accused in the money laundering case by ED include: Former IDBI Bank chairman Yogesh Agarwal, former IDBI corporate banking head BK Batra, former IDBI general manager RS Sridhar, former IDBI deputy MD OV Bundellu and former IDBI executive director SKV Srinivasan The ED has charged all of them under Section 3 and 4 of the stringent Prevention of Money laundering Act (PMLA).
In January, these five bankers were booked by the CBI for their alleged involvement in sanctioning loans to Kingfisher Airlines. All of them are now out on bail. The ED has alleged that IDBI approved the Rs 900-crore loan to Kingfisher Airlines despite its weak financials, low credit rating and negative net worth. The ED complaint said the bank disbursed a part of the total loan within a day of getting a proposal from the airlines on November 5, 2009, even as the sanctioning authorities were aware that the firms previous short-term loan funds of Rs 4,630 crore from other banks was being used for long-term purposes.
Out of the total amount, sources said, IDBI granted a short-term loan of Rs 150 crore in October 2009. In the second tranche, they said, the bank loaned Rs 750 crore to Kingfisher, of which Rs 200 crore was in the form of a bridge loan and the rest for other purposes.
“Short-term loans of Rs 150 crore and Rs 200 crore were sanctioned and disbursed without credit rating. The rating for the short-term loan of Rs 150 crore was done post facto and was below the stipulated rating norm of ‘BBB’. For the corporate loan of Rs 750 crore, the rating was below the benchmark rating of ‘BBB’ stipulated in the bank circulars…. The net worth of the company was negative at Rs 316 crore as on March 31, 2008 and Rs 3,800 crore as on March 31, 2009, against the eligibility norms which required a positive net worth,” said the ED chargesheet.
BBB represents average credit quality, BB stands for weak credit quality, in terms of risk rating. Kingfisher was given a BB rating by the bank. “The (credit) committee, even after observing that the deficiencies in previous sanctions were still prevailing and M/s KAL (Kingfisher Airlines) was having poor financials, negative net worth and a credit rating of “BB”, sanctioned the loan by accepting the hypothecation/assignment of KAL brand, negative lien on the fleet of hire purchase/finance lease aircraft, corporate guarantee of M/s United Breweries Ltd. and personal guarantee of Vijay Mallya, chairman, as security against the loan,” said the ED chargesheet.