Mumbai: For banks looking to recover about Rs9,000 crore from fugitive businessman Vijay Mallya, who was arrested and released on bail in London on Tuesday, it’s a long road ahead.

“This is only one of the many steps in the right direction," said a senior official at State Bank of India (SBI), which leads a group of 16 banks that provided loans to Kingfisher Airlines Ltd, the grounded airline once led by Mallya. “It obviously gives us a lot of confidence in this case, but there is a long way to go before the actual extradition happens and he (Mallya) faces the courts here. Only after that can we hope for any recovery," the official said on condition of anonymity.

Mallya’s extradition hearing has started and the UK courts will take a decision after Indian authorities present adequate proof of financial fraud.

ALSO READ: Vijay Mallya extradition process to be a long, cumbersome exercise

Mallya left for London in March 2016 after the lenders moved the Supreme Court to recover loans from him. His attempt to reach a one-time settlement were rejected by banks. Due to the involvement of investigative agencies such as the Enforcement Directorate and Central Bureau of Investigation (CBI), bankers later dropped all talks of settlement with Mallya and his representatives.

Banks have managed to recover some of their money through various recovery measures. Some of them sold Kingfisher Airlines shares pledged against the loans. This month, they also managed to sell Mallya’s lavish Kingfisher Villa in Goa for Rs73 crore, after three failed auctions. Kingfisher House in Mumbai remains unsold, after multiple attempts at auctioning it.

In February 2016, Mallya and Diageo Plc announced a deal in which the liquor baron would receive $75 million from the global beverages maker in return for stepping down as chairman of United Spirits Ltd, which Diageo owns, and as a non-compete fee. By the time a debt recovery tribunal in Bengaluru blocked Mallya from accessing the money, a payment of $40 million had already been made to him.

One silver lining for bankers in the entire Mallya episode is their increased authority in conversations with defaulting borrowers.

“If a borrower wants to drag legitimate repayment to banks or plans to escape the country, he will think twice due to this case," said a second public sector banker, who is directly involved with the Kingfisher loan recovery case.

Investigations against Mallya and Kingfisher Airlines by the CBI also rattled the banking sector after a few former officials of IDBI Bank were arrested in January, in the matter. The bankers were released on bail by the Bombay high court in March.

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