IMF chief Christine Lagarde will be questioned by a French magistrate on Thursday, May 23 over her role in a 285-million-euro ($366 million) arbitration payment made to a supporter of former president Nicolas Sarkozy, Reuters reported.

Lagarde risks being placed under formal investigation at the hearing for her 2007 decision as Sarkozy's finance minister to use arbitration to settle a long-running court battle between the state and high-profile businessman Bernard Tapie.

Under French law, that step would mean there exists "serious or consistent evidence" pointing to probable implication of a suspect in a crime. It is one step closer to trial but a number of such investigations have been dropped without any trial.

Lagarde is not accused of financially profiting herself from the 2007 payout and has denied doing anything wrong by opting for an arbitration process that enriched Tapie.

However a court specializing in cases involving ministers is targeting her for complicity in the misuse of funds because she overruled advisers to seek the settlement.

"The (IMF's) board is comfortable that she did not profit from this herself. For now it is not a concern," a source close to the board said, adding that it could reconsider that position if judicial procedures took Lagarde away from her duties.