Vijay Mallya
Kingfisher Airlines Chairman Vijay Mallya speaks to the media during a news conference in Mumbai November 15, 2011 [Representational Image].Reuters File

State Bank of India (SBI) told a Parliamentary panel that it was ready to negotiate a onetime settlement of loans if debtors agreed to pay up outstanding principal, reasonable interest and some legal fees, reported Times News Network (TNN) citing sources.

SBI Chairman Arundhati Bhattacharya told the Panel, which is studying amendments to debt recovery laws, that the bank was ready for a haircut with some existing bad loans and it is "...not insisting on payment of interest upon interest."

As discussions veered towards Vijay Mallya's high profile debt issue, in which his Kingfisher Airlines sunk after huge debts from country's many state owned banks, Bhattacharya added that the liquor baron's riders for loan settlement were the stumbling block in the negotiations. Though the bank was affirmative on Mallya's debt repayment request, his terms were unacceptable to SBI, said a source to TNN.

As the panel pointed out to media reports in which Mallya's legal counsel apprised the Supreme Court on being ready to pay up more money than he had actually borrowed, Bhattacharya said the lenders' interest needed to be maintained. The reports had said that Mallya's counsel proposed a Rs. 6,000 crore repayment plan as opposed to Rs. 4,900 crore he had in actuality borrowed from state-run banks.

SBI-led consortium of banks, which are fighting the case in courts, have said in their auction notices that Kingfisher Airlines and its promoter Mallya's outstanding amount (including compounded interest) stood at Rs. 6963 crore until February 2014. With penalties, the claim increased to Rs. 9,000 crore. The banks have also recovered certain amount from selling shares of his companies pledged as guarantee to loans.

TNN noted that the lenders so far have sought to know how much money Mallya was ready to bring to the negotiating table as an upfront payment. They have asked the liquor baron to come clean on his assets both in India and abroad. They have sought a clear timeline for payment and a list of realizable assets. Mallya, for his part, has publicly stated that he was willing to pay Rs. 4,400 crore initially and await a court case involving claims on the proceeds from two UB Group companies. The latter, if won by the banks, will act as repayment money.

As bankers say that the time was running out for any gains from Mallya's resettlement offers, his companies and assets have all been locked up for lack of negotiators, multiple financial crime investigations, high auction prices, regulatory issues and court battles.

On June 16, Standard Chartered Bank (SCB) alleged that SBI "colluded" with Mallya to deprive the London-based bank from carrying out a transaction with Diaego Plc. The UK based liquor giant Diageo had issued a guarantee to SCB for a $135 million loan to a third company, also controlled by Mallya in the U.K,  to release United Breweries Holding Limited (UBHL) shares for acquisition. 

SBI has refuted the allegations. Its lawyers said: if that were the case then the country's largest lender would not have been waging a court battle against the high-profile defendent.