What Made IDBI Give Rs 900 Crore To Vijay Mallya? Curious Case Of 2 Notes

New Delhi: When Vijay Mallya's Kingfisher Airlines was given a 900-crore loan by state-run lender IDBI, it was already entangled in a full-blown financial crisis. The loan was granted in 2009 - in March that year, the airline had declared losses of nearly 1,600 crores.

At IDBI, an internal note flagged those losses.  But another note was positively upbeat about the luxury airline's prospects, highlighting the brand value of Kingfisher (Mr Mallya built much of his fortune on the strength of the best-selling beer of the same name), and claiming that the brand had been pledged as collateral (this allowed Mr Mallya to borrow at a lower rate of interest than an unsecured loan). This second note also expressed confidence in the corporate guarantee offered by the liquor company that Mr Mallya owned, whose stake in companies like United Breweries was worth several hundred crores.

Over-ruling the concerns of the first note, bank officials used the second memo as the basis of the 900-crore loan, according to investigators who say that Mr Mallya illicitly routed a chunk of the IDBI loan abroad.

The 60-year-old pony-tailed ,earring-wearing entrepreneur who controversially left India for London earlier this month, has said the money was used in foreign countries to settle payments for parking his planes at international airports and other genuine costs incurred as part of operating an airline.  

But the IDBI loan has merited twin inquiries. The financial crime-fighting agency, the Enforcement Directorate, is handling the  money-laundering charges.  The CBI, on the other hand, is looking at whether bank officials colluded with Mr Mallya in allowing him a loan that was not adequately secured.

Mr Mallya, wanted for loans of a billion dollars  that were given to his airline,  refused to travel back to India last week to meet with Enforcement Directorate officials for questioning, asking for time till April.  He has yet to respond to a second order for his appearance in Mumbai.  

In his absence, investigators have asked IDBI to arrange the names of the bank officers who prepared the two notes so that they can be questioned about whether they were pressured by either their bosses or others outside the bank to sanction the loan.

Yogseh Aggarwal, who was then the chief of IDBI, has been questioned already.  Sources said that he was "evasive" about details of a series of meetings with Mr Mallya that were followed by the 900-crore payout in three tranches. Mr Aggarwal has reportedly said that a bank of IDBI's size cannot be depleted of basic checks and balances at a senior executive's order.  As proof that his decision was kosher, he has also pointed out that after he left the bank, the loan to Mr Mallya was not questioned by his successors either.