It speaks volumes for the diffidence and timidity of banks that the State Bank of India (SBI) is yet to declare Vijay Mallya, chairman of the bankrupt Kingfisher Airlines, a wilful defaulter. Last week, a much smaller lender, the United Bank of India (UBI), declared Kingfisher and Vijay Mallya a wilful defaulter for not repaying Rs 400 crore after the Calcutta High Court dismissed an appeal by the company against the notice issued to it.
Kingfisher Airlines Ltd owes banks around Rs 7,000 crore and has been grounded since December 2012; even before that the company wasn’t servicing its loans and although the group’s other businesses were faring well, there was no attempt to pay off the loans.
If only India’s bankers had been more assertive with errant borrowers, their balance sheets might have been in a better shape today. A story of too many carrots, and very little stick, their willingness to take haircuts and write-downs—this goes back to the time when IDBI and ICICI Bank were financial institutions—has encouraged promoters to be lax about repayments, even behave with impunity. In Kingfisher’s case, the lenders needed to have accessed cash flows of United Breweries and United Spirits Ltd even as they restructured the airline’s debt; the worst move they made was to convert the dues into equity.
Kingfisher Airlines Ltd owes banks around Rs 7,000 crore and has been grounded since December 2012; even before that the company wasn’t servicing its loans and although the group’s other businesses were faring well, there was no attempt to pay off the loans.
If only India’s bankers had been more assertive with errant borrowers, their balance sheets might have been in a better shape today. A story of too many carrots, and very little stick, their willingness to take haircuts and write-downs—this goes back to the time when IDBI and ICICI Bank were financial institutions—has encouraged promoters to be lax about repayments, even behave with impunity. In Kingfisher’s case, the lenders needed to have accessed cash flows of United Breweries and United Spirits Ltd even as they restructured the airline’s debt; the worst move they made was to convert the dues into equity.
Source Name: Financial Express
September 9th, 2014
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