Tuesday, February 07, 2017

Root cause of KFA's mega loan fraud unraveled

New Delhi: In a new twist of liquor barron Vijay Mallya’s mega loan fraud case, an annual financial inspection revealed that the Reserve Bank of India (RBI) had instructed some public sector banks (PSBs) in 2008 to provide the extended fresh loans in several rounds to private airline now defunct Kingfisher Airlines (KFA), owned by billionaire Mallya, and further continued the loan sops thereafter to the firm without paying heed to the central bank’s asset classifications guidelines, top sources close to the development told The Pioneer on Monday.

The case came to the light when an annual financial inspection team found that the airlines firm was falling under the category of ‘sub standard assets’- a category which is considered as non-performing asset or NPA in the bank loan process.

As per assets classification norms on bank loans, there is no risk in business if any firm is found to fall under standard assets category and if it falls beyond this category, the firm gets declared as an NPA. That means KFA was not fulfilling the banks’ eligibility norms and fell under sub standard assets category which reflected its poor status of assets classifications and loan repayment for getting next fresh round of loans.

As per the sources, the RBI had conducted an Annual Financial Inspection (AFI) of the banks in 2008 at one of inspection wings of a Kolkata-based public sector bank. The move of central bank was to check books and balance sheet of banks and issue follow-up directives to the concerned banks as well as the consortium of lenders led by the largest public sector lender, State Bank of India (SBI) which altogether had extended loans to the Mallya-owned airlines firm.
07/02/17  Madhusudan Sahoo/Daily Pioneer