India police launches initial probe into IDBI loan to Kingfisher

NEW DELHI/MUMBAI Sat Aug 9, 2014 9:43am EDT

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NEW DELHI/MUMBAI Aug 9 (Reuters) - India's top crime fighting agency is investigating a loan made by state-run IDBI Bank Ltd to debt-laden Kingfisher Airlines worth 9.5 billion rupees ($155.38 million), a police spokeswoman said on Saturday.

The Central Bureau of Investigation (CBI) is looking into why the loan was approved when the airline has a negative net worth and a negative credit rating, Kanchan Prasad said.

"The CBI has registered a preliminary inquiry to inquire into the role of IDBI and Kingfisher Airlines," she said.

"There was no need for the bank to take the exposure outside the consortium when already other banks' loans were getting stressed."

A preliminary inquiry is usually the first step before a formal case is filed.

Kingfisher Airlines, controlled by liquor baron Vijay Mallya, has not flown in almost two years and owes about $1 billion to a consortium of mostly state-run banks, and hundreds of millions of dollars more to airports, tax authorities and others.

IDBI did not respond to requests for comment.

Prakash Mirpuri, a spokesman for UB Group, Kingfisher's controlling shareholder, said: "We have not received any communication and are unaware of any such inquiry."

Two-thirds of India's bank assets are controlled by state-run banks, which in turn account for three-quarters of the sector's bad loans.

Last week, CBI arrested Sudhir Kumar Jain, the chairman of state-run Syndicate Bank Ltd over allegations that he was seeking bribes to favour debtors.

(1 US dollar = 61.1400 Indian rupee) (Reporting by Aditya Kalra in NEW DELHI and Himank Sharma in MUMBAI; Additional reporting by Devidutta Tripathy and Tommy Wilkes; Editing by Lynne O'Donnell)

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