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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)
By Una Galani
MUMBAI, April 18 (Reuters Breakingviews) - Vijay Mallya could be an important scalp in India's bad debt fight. The liquor baron fled to the United Kingdom in 2016 after local banks sued to recover $1.4 billion owed by his now defunct Kingfisher Airlines. The saga has made him the poster child for India's soured loan problem. His arrest in London on Tuesday – as a precursor to a possible extradition – is one step required to help New Delhi sell any bailout of the country's state-controlled banks.
Lenders last year rejected an offer by Mallya to settle his dues for at least 43 cents on the dollar, double the average recovery rate for Indian creditors. The Indian government now appears determined to make an example of the so-called "King of Good Times", who remains a co-owner of the Force India Formula One team and chairman of Mumbai-listed United Breweries , which counts Dutch brewer Heineken as its largest shareholder.
There is a clear political incentive. A government bailout of India's banks might cost up to 4 percent of gross domestic product and risk a political backlash in a country where many still live below the poverty line.
India appears reluctant to extend a lifeline to banks without making a show of taking a hard line on the supposed culprits. The flamboyant Mallya has made himself an obvious target. The extradition process may be long and there is no guarantee it will succeed. But aggressively pursuing the 61-year old helps New Delhi achieve its objective either way.
On Twitter https://twitter.com/ugalani
CONTEXT NEWS
- Indian businessman Vijay Mallya was arrested in London on April 18, the Metropolitan Police said in a statement.
- The 61-year-old tycoon was arrested on behalf of the Indian authorities over accusations of fraud and was due to be presented in Westminster Magistrates' Court the same day.
- Indian TV channel ET Now reported that Mallya had already been granted bail, citing an unnamed Mallya lawyer. Reuters could not immediately confirm his status.
- "Extradition hearing in court started today as expected," Mallya said in a message on social network Twitter.
- India had asked Britain to extradite Mallya to face trial after the liquor and aviation tycoon fled there last March after banks sued to recover about $1.4 billion that Indian authorities say is owed by his now-defunct Kingfisher Airlines.
- Mallya has repeatedly dismissed the charges against him.
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(Editing by Peter Thal Larsen and Liam Proud)
© Reuters News 2017
