In a fresh twist in the tale that is set to question the integrity of the Reserve Bank of India (RBI), it has been found that top RBI officials allowed certain banks to lend to Vijay Mallya's Kingfisher Airlines (KFA) violating its own asset classifications guidelines.
According to RBI's assets classification norms on bank loans, there is no risk in lending to a firm whose assets fall under standard assets category. However, if a company's assets come under sub-standard assets category, the firm gets declared as a non-performing asset (NPA).
In 2008, during a routine annual financial inspection by the RBI of a Kolkata-based bank, the inspection team found that KFA was falling under the category of sub-standard assets. Clearly, that reflected the airline's poor status of assets classifications and loan repayment for getting next fresh round of loans, the Pioneer reported, citing sources.
"As per the RBI guidelines, we were conducting a routine exercise and inspecting bank books at one of the centres in a PSB, headquartered in Kolkata. During the AFI, we had observed that the total loan amount of Rs 3,000 crore, which had been provided to Kingfisher Airlines until 2008, was not falling under standard asset category. So, we had decided that the airlines firm should have declared as an NPA so as to stop any further financial assistance to be extended to the firm," a source told the Pioneer.
However, just when the inspection team decided to take steps to stop any fresh loan to KFA and declare the airline's existing loan as NPAs, the team received a directive from top RBI officials, asking them not to turn the loan as NPA. And that, in turn, ensured the now defunct airline continued to get loans from the consortium of lenders led by State Bank of India (SBI).
The source declined to disclose the name of the bank, but said the inspection was a routine affair of the RBI and the inspection team had acted as per their superiors' order.
"Thereafter, the above loan continued to fall under the category of a standard asset which was the gateway to get further assistance and thus the Mallya-owned firm remained eligible for the next round of fresh loans by the consortium of lenders led by SBI. As a result, the firm was extended several fresh rounds of loan amounting to a total of Rs 6,000 crore over and over again for years," sources said.
A RBI official, on the condition of anonymity, confirmed the development and said: "Had the RBI paid heed to the suggestions of the internal team and turned the already sanctioned loan as NPA, the firm would not have been able to go for a fresh round of loans. And thus our banks, which faced with huge NPAs as of today, would have been saved."
The airline managed to get most of the loans between 2006 and 2009 when Vijay Mallya was also a Rajya Sabha MP and reportedly lobbied the then governments for the revival of KFA.