Vijay Mallya the delinquent borrower on the run from several agencies of the government, now wants to strike a deal, but the banks remain wary.
The Vijay Mallya affair continues, like a B-grade Bollywood potboiler in which the villain smartly eludes a bunch of bumbling cops. The flamboyant businessman, whose airline company made a spectacular crash in 2012, is wanted by a clutch of law enforcement and regulatory agencies, and banks and financial institutions whom he owes in excess of Rs.9,000 crore—Rs.6,963 crore being the principal and the remainder being the interest on the accumulated borrowings. But there are others too waiting for the prodigal son to return, among them his erstwhile employees, to many of whom he owes unpaid salaries. Then there are suppliers such as the fuel companies, component suppliers, airport operators, caterers and many others to whom Mallya’s companies owe substantial sums.
After playing hide-and-seek for so long, suddenly, out of the blue came Mallya’s recent offer, from a faraway location, to pay a not-so-insubstantial sum of Rs.4,000 crore. As always in such cases, the devil lay in the details. For one, the offer of a one-time settlement, to be made over six months, would imply that banks would get only about 40 per cent of what he owes them, and that too with all the uncertainties associated with Mallya. But even more serious are the precedents that such a heavily discounted settlement would set for the many more such cases that saddle the loan books of banks. The third question that Mallya’s offer poses is, Why should the banks accept his offer when his “net worth” in the four companies in which he has significant holdings—United Breweries, Mangalore Chemicals and Fertilizers, UB Holdings and the defunct Kingfisher Airlines— amount to more than Rs.7,000 crore?
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