Banks will strive to recover “every penny” from beleaguered liquor baron Vijay Mallya who left the country owing more than Rs90bn ($1.3bn), Finance Minister Arun Jaitley said yesterday, as warnings sound over a mounting bad debt problem.
More than a dozen lenders are chasing Mallya, once dubbed The King of Good Times, for Rs90bn in unpaid loans, but he left the country on March 2 despite calls for his arrest.
“Every government agency, whether it’s the taxation department or the investigative agencies, wherever he has violated the law, is going to take strong action,” Jaitley told a conference organised by India Today television channel in New Delhi.
“As far as the banks are concerned... I’ve been briefed that they are going all out to recover every penny of the last rupee that they can.”
The country’s financial crimes agency has summoned Mallya to appear before investigators on March 18 in connection with a money-laundering probe.
But he has asked the Enforcement Directorate to give him until April to appear. A spokesman for Mallya declined to comment.
In a further blow, an auction yesterday of Kingfisher House, the former headquarters of the entrepreneur’s now-defunct Kingfisher Airlines in Mumbai, attracted no bids.
There were no bids for the building, at a starting price of Rs1.5bn, business daily Mint reported.
The prime property located near the Chhatrapati Shivaji International Airport measures around 17,000 sq ft.
A banner inviting bids for the e-auction was put up outside the building. Bids can be submitted till April 4. The actual auction will take place on April 6.
Besides, e-auction has been initiated for selling nine high-end cars like two Honda City EXi, a Honda Civic, two Toyota Camry, a Toyota Innova, a Toyota Corolla, a Hyundai Elantra and a Hyundai Santro Zip.
Other movable assets up for grabs include office furniture and fittings, air-conditioners and other items in the Kingfisher House.
The businessman’s massive debt has become a symbol of Indian banks’ vast volume of bad loans- meaning in default or close to it - seen as a threat to financial stability in Asia’s third-largest economy.
Critics say the government has not done enough to tackle the issue of wealthy individuals, such as Mallya, who obtain huge loans that they later fail to repay.
Jaitley told the gathering that many bad loans were due to a slowdown in sectors such as steel, which is suffering after China flooded the market with cheap excess metal.
But the finance minister also said that lenders granting individuals large loans - sometimes in unusual circumstances - which then went awry was “the real cause of worry”.
“This has brought a huge bad name both to India’s banking and also to India’s private sector. It’s extremely dangerous for the future if we are not able to remedy this,” he said.
Mallya, who has not been charged with any crime, denies absconding and has lashed out at media which accuse him of fleeing the country.
In its budget last month Prime Minister Narendra Modi’s government announced recapitalisation measures for public sector banks, although some economists said the funds were not sufficient.
On Saturday the market regulator laid out tougher measures to tackle individuals or businesses classified as “wilful defaulters”, preventing them from raising fresh funds on capital markets or from sitting on listed company boards.
Mallya was known as the “King of Good Times” before the 2012 collapse of his Kingfisher Airlines, which left thousands of workers unemployed and millions of dollars in unpaid bills.
Meanwhile, Heineken is likely to ask Mallya to step down from the board of United Breweries, India’s largest brewer, three people with direct knowledge of the plan said.
They said such a move would likely be a prelude to the Dutch drinks firm raising its stake in the maker of Kingfisher beer to above 50%, betting on a small but fast-growing beer market.
Heineken acquired a 37.5% stake in United Breweries in 2008 through its takeover of Scottish & Newcastle and has since increased its holding to 42.4%. With Mallya distracted by debts from, this could be a timely grab by Heineken in a market that is growing much faster than the global average.