Even as a spooked Vijay Mallya played his panic gimmick saying he met the Finance Minister before leaving India, Republic TV has accessed secret papers which expose Congress Government’s sweet deal with Mallya. The papers show correspondences, dated August 2010, between SBI and RBI, which expose on how Congress authored a separate exclusive deal only for Kingfisher Airlines. The letter trail proves that the then Finance Ministry put pressure on RBI to break propriety to favour Vijay Mallya.
Letters exchanged by India's central bank, the Reserve Bank of India (RBI), and the country's largest bank, the state-owned State Bank of India (SBI), reveal that an exemption was requested regarding debt restructuring in the entire aviation industry primarily based on the financial difficulties being faced by Kingfisher Airlines.
In the RBI's response to SBI's request -- a letter with the subject line "Financial difficulties faced by Airlines Industry - M/s Kingfisher Airlines - Relaxations sought in restructuring guidelines", dated August 27, 2010, the central bank makes it clear that restructuring has to be based on viable parameters and that "banks should convince themselves of viability and sustainability of cash flows and operations of every airline that that approaches them for restructuring".
It also makes clear that restructuring in such a manner may prove futile, writing: Restructuring may not take it out of present difficulties unless other issues requiring action on part of borrowers (airlines), like cost-cutting, route rationalisation, proper pricing, etc. are taken care of.
Despite clearly having its misgivings, the RBI accedes, writing: 'In view of the significance of the Civil Aviation sector to the economy, and the unique nature of the Airline Industry, we have considered the following modifications to our restructuring guidelines as a one time measure, for the aviation sector. It goes on to list those measures, and in doing so, also reveals that there were other requests that it was not accepting.'
"As regards to the other requests, we regred our inability to accede to the same, and advise that all banks should strictly adhere to the extant guidelines."
Following that, in January 2012, SBI writes back to the RBI citing the latter's letter (the one mentioned above) and the restructuring modifications that were then permitted for the aviation sector, and confirms that Kingfisher Airlines subsequently had its loans restructured. It went on to make the following points:
That KFA wasn't able to raise additional capital of Rs 1000 crore via a GDR but instead raised Rs 1158 crore in unsecured loans from "promoters and associates" in 2011.
Following this, the airline had the highest load factor among airlines, SBI says, adding however, that 'external' factors (which were actually market factors) such as fuel costs, Rupee depreciation, increase in loan interest and airport charges, and inability to charge customers more, the entire aviation sector, especially KFA and Air India, was going through a crisis.
It cites that the Prime Minister, Finance Minister and Civil Aviation Minister had acknowledged the aviation sector's troubles and were proposing to take steps to inject liquidity into aviation companies and reduce their costs. These measures included: Enhancing FDI norms for Indian carriers, and allowing Indian carriers to import aviation fuel directly in order to save on taxes and duties.
It then reveals that Kingfisher Airlines' account with SBI had been rendered irregular and declared NPA, because oil companies began insisting on cash payments rather than bank guarantees. Two more banks had classified the KFA account as sub-standard. Despite this, it goes on to state that KFA is making every effort to achieve satisfactory performance, and cites the Government's proposals to conclude that it "expects the company's liquidity position to improve within the next 6 months." Accordingly, it preemptively sought permission to remove KFA's NPA status once certain accounts were regularised.
Earlier in the day, during the recess, Vijay Mallya claimed that he had met with the Finance Minister before he left India.
"I met the Finance Minister before I left", said Vijay Mallya while speaking to journalists outside the Westminster Magistrates' court on Wednesday, during the course of his extradition hearing.
His statement, however, got a strong rebuttal from Finance Minister who while hitting back at Mallya said he never gave any appointment to the latter since 2014.
What followed was even more ironic as within minutes of Finance Minister Arun Jaitley issuing a video statement denying that he had held a formal meeting with Vijay Mallya, the latter did a massive u-turn on his claim, saying “I didn't have any formal meeting with the Finance Minister.”
Vijay Mallya appeared in London's Westminster Magistrates' court for his final extradition hearing. During the hearing, a video of the Barrack no.12 of Arthur road jail in Mumbai, wherein Mallya would be lodged if extradited to India, was submitted before the court for the review of the judges.
Vijay Mallya is an alleged financial offender who is facing charges of bank fraud and money laundering in India, amounting to the tune of Rs 9,000 crore. Mallya, who has been in the UK since March 2016 is wanted in India for defaulting on bank loans. He was arrested by the Scotland Yard on an extradition warrant in April this year.