India investigates $155m state bank loan to troubled airline

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 on Sunday.

The Central Bureau of Investigation 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 said.

Kingfisher, owned by India's liquor baron, the flamboyant Vijay Mallya, owes nearly $1.5 billion to banks, airports, fuel suppliers and staff, among others.

The low-cost airline, which never made a profit after it started operating in 2005, lost its license to fly two years ago, after it failed to end an employee strike sparked in part over Kingfisher's failure to pay wages.

Owners of Kingfisher's grounded planes have taken them back.

Prasad said the CBI had carried out a "preliminary inquiry" 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 businessman, also a co-owner of a Formula One team, was known to host lavish yacht parties attended by politicians and Bollywood stars.