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Rediff.com  » Business » Mallya's flashy lifestyle makes him an easy target for politicians

Mallya's flashy lifestyle makes him an easy target for politicians

March 11, 2016 12:26 IST

India's stance shows business tycoons will be held more accountable for the debts they rack up, says Una Galani.

Image: Mallya complained the campaign was portraying him unfairly as the ‘poster boy’ of India's bad debts.. Photograph: Reuters
 
 

India's hot pursuit of liquor baron Vijay Mallya is a belated warning to local tycoons. 

After years of using their influence to run roughshod over the country's state banks, business leaders are on the defensive.

Overextended lenders are fighting back - and finally appear to have the support of politicians.

Creditors, led by State Bank of India, claim they are entitled to a $75 million cash payout that Mallya received from Diageo.

The British distiller agreed to pay the self-styled "King of Good Times" the money to step down as chairman of their Indian spirits subsidiary.

Lenders think the cash should go towards repaying the $1 billion owed by his collapsed airline which was grounded more than three years ago.

Finance Minister Arun Jaitley has weighed in, reassuring parliament that lenders will recover their dues from Mallya and other defaulters.

A court ordered the payment to be temporarily blocked. Not long ago such coordination was unthinkable.

It adds force to a campaign by the India's central bank to put errant borrowers in their place. 

Mallya's flashy lifestyle makes him an easy target for politicians to show a frustrated public they are cracking down on those who stand accused of abusing the system.

He is a member of parliament, part owner of a Formula One team, and the chairman of United Breweries - 42 percent owned by Heineken - which makes the popular Kingfisher beer.

The problem is that India is acting to late. Mallya has already received $40 million from Diageo and has apparently gone overseas.

In a statement, he insisted he had no reason to abscond and is in talks to reach a settlement with the banks.

He also complained the campaign was portraying him unfairly as the "poster boy" of India's bad debts.

The banks' newfound steel comes too late to fix their balance sheets.

As a result, it's unlikely to lead to a big reduction in the $27 billion that the government estimates state-controlled lenders need to meet global capital requirements by 2019.

Nonetheless, India's tough stance is better late than never.

It offers some hope that, in the future, tycoons will be held more accountable for the debts they rack up.

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

Una Galani
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