Wilful defaulter tag a 'powerful weapon' for creditors: Raghuram Rajan

The RBI Governor's statement are significant in light of United Bank declaring Vijay Mallya and Kingfisher Airlines wilful defaulters

The 'wilful defaulter tag' is a powerful weapon in the hands of banks for resolving bad loans, RBI Governor Raghuram Rajan said on Friday.

His comments take on added significance, coming as they do only days after state-run United Bank of India declared Kingfisher Airlines, chairman of industrialist Vijay Mallya, and three other directors as "wilful defaulters".

"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 Citibank in Boston last night. The comments come from a note circulated by the event organiser.

Mallya, whose Kingfisher Airlines owes more than Rs 9,000 crore to several lenders, had yesterday said he will challenge UBI's decision to declare him a wilful 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 Airlines owes about Rs 9,140 crore to about a dozen banks. Of them, IDBI Bank is considering declaring Mallya a willful defaulter and is waiting out its 15-day notice period on non-payment of dues.

Kingfisher Airlines owes Rs 750 crore to IDBI Bank.