State Bank of India is under Central Bureau of Investigation’s lens for its large exposure to failed Kingfisher Airlines.

“We are examining the borrowing from one public sector bank and investigation is in progress,” a CBI official told Business Line when asked about the status of CBI’s probe in the Kingfisher Airlines matter.

The 17-bank consortium, led by SBI, had an exposure of around Rs 7,000 crore to KFA. Of this, SBI’s exposure was close to Rs 1,700 crore. But in recent months the consortium partially offloaded the shares kept as collateral by the Vijay Mallya-controlled Kingfisher Group.

The consortium had realised about Rs 1,000 crore from the sale of shares, it is learnt.

The investigations are in the early stages, said the CBI official.

A media report published on Monday said that the Mallya-owned airline pocketed part of the funds raised from banks for leasing aircraft. It is suspected that the airline sought loans based on inflated leasing quotations.

However, the actual lease rates were low and the difference was kept by the airline.

KFA’s take

Meanwhile, Kingfisher Airlines in a statement said that the airline sold and leased back aircraft from major international lessors who would only pay fair market prices. No Indian bank has financed such aircraft acquisitions, it added.

“KFA took loans from Indian banks, called PDP loans, typically amounting to 15 per cent of the aircraft purchase price from Airbus. Upon delivery of the aircraft and completion of the sale and leaseback transaction, Airbus directly refunded the PDP amount to the banks,” Kingfisher said.

While Kingfisher Airlines was flying, it was operating more than 60 aircraft. Of these, it owned only three and the remaining were on lease.

Though Kingfisher stopped operations last October, leasing companies were finding it difficult to take back the aircraft that they had leased out to the airline.

This is because entities such as airport operators, who have also lent money to Kingfisher Airlines, want their debts to be cleared before allowing the aircraft to leave Indian shores.

siddhartha.s@thehindu.co.in

(This article was published on September 30, 2013)
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