The Indian government has asked the UK to deport the liquor tycoon and self-styled “King of Good Times” Vijay Mallya after the collapse of his heavily indebted company, Kingfisher Airlines.

Unlike other top Indian businessmen who prefer to keep a low profile, 60-year-old Mallya has become a symbol of capitalist aspiration and extravagance in conservative India because of his flashy lifestyle. The liquor baron, who owns a Formula One team, frequently appears alongside models and actors and is seen as a wealthy playboy figure in India.

With Mallya refusing to leave the UK, Indian authorities risk embarrassment as banks face growing pressure to recover a string of bad loans, and Mallya’s case has been interpreted as a test of how India handles wealthy tycoons.

The flamboyant businessman made his fortune selling beer under the Kingfisher brand and branched out into aviation, Formula 1 racing, and Indian cricket.

His debts were incurred by the failure of his airline and he is being pursued by a group of mainly state-run banks who lent him money.

In February he was blocked from receiving a $75m payment for agreeing to step down as chairman of United Spirits, which he sold to Diageo in 2012.

A consortium of banks and creditors had demanded the funds should be used to settle some of Mr Mallya’s outstanding debts.

Earlier this month a consortium of 17 banks, led by the State Bank of India, rejected his proposal to pay 40bn Indian rupees (£416m) by September to settle his loans.

The group said the offer was inadequate and subject to too many conditions.

Following the rejection, the Supreme Court in New Delhi asked the businessman to make a full disclosure of his assets.

Mallya, who had a diplomatic passport as a member of parliament’s upper house, had his passport cancelled by the foreign ministry last Sunday. A special judge in Mumbai issued a non-bailable arrest warrant against him. He claims he has been “forced into exile” in the UK.

Mallya claims the government’s figure is an “inflated amount”, and Indian banks are refusing to settle because of public pressure against him. He said: “As professional bankers, they would like to settle and move on but, because of my image as portrayed, they are reluctant to be seen as giving me any discount.

“It will attract huge media criticism and inquiries by vigilance agencies in India.”