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Mallya row: Credit rating given to Kingfisher Airlines was arbitrarily hiked by IDBI Bank

Amongst the various irregularities cited by the CBI in its chargesheet in the Vijay Mallya-accused IDBI loan default case, is a detailed account of how a low credit rating given to the now-defunct Kingfisher Airlines was arbitrarily hiked by IDBI Bank officials. This act was conducted so that the officials could extend the airline a corporate loan.

Accessed by DNA, is one of the many witness statements attached in the chargesheet of Sanjay Trassy, assistant general manager of the IDBI bank. In his statement, Trasy has given an account of how he gave a low rating to Kingfisher Airlines, therefore giving it a low credit marking in the loan sector.

Trasy had submitted a report to IDBI bank about the market status of the airline, stating that the company’s financial position was unsatisfactory. However, despite this, the bank disbursed a corporate loan of Rs 750 crore to the airline in 2009.

According to his report, the company faced a gross loss and net loss at the end of the financial year of 2009. Furthermore, it had accumulated losses, eroded network, low current ratio and a high gearing ratio. “Debt level of the company are high as on March 31,2009 (Rs 5665.55 crore), including unsecured loans from the bank, indicating a major risk burden on the banking system,” his statement read.

“The reports of Trasy were considered in the meeting of the risk rating committee held on November 16, 2009 under the chairmanship of P Sitaram , CGM, finance and accounts department. A rating of BB (2.70/6) with a score of 50 was approved against the proposed rating of B(2.09/6) with a score of 45 proposed by Trasy. However detailed reasoning and rationale for upgrading the rating from B to BB and improving the score from 45 to 50 was not recorded in the minutes of the meeting,” the CBI’s chargesheet states.

“Investigation has revealed that the percentage score awarded by the risk rating committee in the earlier meeting dated November 7,2009 was only 41.16%. However, the same was improved to 50% in the second rating for which no reason was recorded. Hence it is worth mentioning that the maximum permissible deviation allowed by credit policy of the bank to target clients norms is to relax the stipulated rating from BBB(3.55/6) to BB. However in case a borrower is rated B, the said relaxation is not permissible and the proposal would become ineligible for the bank finance,” reads the charge sheet.

The CBI had on January 24 filed a charge sheet against nine senior officials of IDBI bank, besides Vijay Mallya and Kingfisher Airlines in the alleged cheating case.

Kingfisher Airlines allegedly diverted Rs 263 crore from loans amounting to Rs 900 crore extended by IDBI to Kingfisher Airlines. CBI has slapped IPC sections related to criminal conspiracy, cheating and provisions of Prevention of Corruption Act on the accused