Reserve Bank Governor Raghuram Rajan has said the wilful defaulter tag is a powerful weapon in the hands of banks for resolving bad loans.His comments come days after the state-run United Bank of India declared the industrialist Vijay Mallya as "wilful defaulter".
"The wilful defaulter tag is a powerful weapon in the hands of creditors for resolving distressed assets. It shuts out access to credit within the Indian financial system for a borrower," Rajan said without naming Mallya. He was speaking at an event organised by American bank Citi at Boston last night. The comments come from a note circulated by the event organiser.
Mallya, whose Kingfisher Airlines owes money to several banks, had yesterday said he will challenge UBI’s decision to declare him a willful defaulter.Mallya is the chairman of United Breweries, producer of India’s best-selling beer brand Kingfisher. He is also the chairman of United Spirits, now controlled by Diageo Plc.
Besides United Bank of India, Kingfisher owes about Rs9,140 crore to about a dozen banks. Of them, IDBI Bank is considering declaring Mallya a willful defaulter and is serving out its 15-day notice period on non-payment of dues.Kingfisher owes Rs750 crore to IDBI Bank.