India's top crime fighting body is investigating a $155 million loan by a state-run bank to debt-ridden Kingfisher Airlines, a police official said Sunday.
The Central Bureau of Investigation (CBI) was conducting an initial probe into why the 9.5 billion rupee ($155 million) loan from the IDBI bank was approved given Kingfisher's levels of debt.
"When the company was in the red why did the IDBI bank give the loan?" CBI spokeswoman Kanchan Prasad told AFP.
Kingfisher, owned by India's liquor baron, the flamboyant Vijay Mallya, owes nearly $1.5 billion to banks, airports, fuel suppliers, staff and others.
The low-cost airline, which did not make any profit since it started operating in 2005, lost its licence to fly two years ago, after it failed to end a strike by staff including over a failure to pay wages.
Owners of Kingfisher's grounded planes have taken them back.
Prasad said the CBI had carried out a "preliminary enquiry" into the loan over the past two months. The next step could be the filing of a formal case.
Last week, the CBI arrested the chairman of state-run Syndicate Bank over allegations that he took bribes in exchange for loan extensions to private companies.
Prasad said the two cases were not connected, saying the watchdog was not targeting loans by state-run financial institutions as part of a specific investigation.
Mallya, once the self-proclaimed "King of Good Times", who made his fortune through his liquor business, has been battling to maintain control over his empire.
The flamboyant businessman, also a co-owner of a Formula One team, was known to host lavish yacht parties with Bollywood stars and politicians as guests.