An Indian court ordered a consortium of banks Thursday to start the process of recovering loans from the tycoon Vijay Mallya who has refused demands to return home from exile in Britain.
The Debt Recovery Tribunal ordered a consortium of 17 banks led by the State Bank of India to start the process of recovering 62 billion rupees (around $1 billion) at an annual interest rate of 11.5 percent from Mallya and his companies, the Press Trust of India news agency reported.
Among the companies named in the ruling were United Breweries -- a liquor company which Mallya once owned and in which he still retains a small shareholding -- along with the now defunct Kingfisher Airlines.
The lenders had filed a case with the tribunal in 2013 to recover loans made to Kingfisher Airlines which started running into financial difficulties in 2011 and eventually went bust.
There was no immediate comment from Mallya who fled to Britain last March as pressure grew from the banks to pay back the loans.
He has repeatedly failed to appear before investigators at the Enforcement Directorate, a financial crimes agency, who suspect him of misusing funds loaned by a state bank.
Experts say Thursday's ruling may be too late to enable lenders to recover anything from Mallya, who was known for his flamboyant lifestyle and styled himself as the ‘King of Good Times’.
‘The DRT ruling is welcome, but it has come three years too late,’ said Anjali Sharma, a consulting professor at the Indira Gandhi Institute of Development Research in Mumbai.
‘Perhaps in 2013, when the case was filed, there was some value recoverable in the company.... but now is there anything left to recover for lendors?
‘Leased assets like planes have no value, the management has gone, there is no value to Vijay Mallya's promises. I wouldn't place any bets on recovery.’
Mallya, who remains a part-owner of the Force India Formula One team, has come to personify India's problems with bad debt that are piling up on the balance sheets of banks.
The previous central bank governor, Raghuram Rajan, had made cleaning up the banking sector's mountain of soured loans -- defined as in default or close to it -- a priority of his tenure.
In 2015, the RBI ordered banks to undertake an Asset Quality Review -- forcing lenders to classify many more loans as soured -- and set a 2017 deadline for them to clean up their balance sheets.
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