NEW DELHI (AFP) - Shares in India's debt-laden Kingfisher Airlines plunged as much as five per cent on Wednesday after banks said they would start recalling loans worth US$1.5 billion (S$1.8 billion), pushing it closer to collapse.

Kingfisher, controlled by Indian liquor baron Vijay Mallya, slid five per cent - the maximum daily limit - before clawing back some losses to trade down 4.58 per cent at 10.62 rupees in early afternoon.

The fall came after the airline's creditor banks announced late on Tuesday they would begin recalling outstanding loans worth around US$1.5 billion that could pave the way for sale of Kingfisher assets held as collateral.

"We have decided to recall (initiating the recovery process) the loans given to Kingfisher Airlines," Shymal Acharya, a deputy managing director of state-run State Bank of India, which heads the consortium of bank lenders, said.

However, Acharya said after the meeting in Mumbai that the board of each bank that is owed money would decide individually how it seeks to recover its funds.

A spokesman for Bangalore-based Kingfisher said on Wednesday he could not immediately comment on the banks' decision to start recovering the loans.

The carrier, whose planes have been grounded since October, has never made a profit since it began flying in 2005. It owes vast sums to banks, airports, fuel suppliers and its staff.

Kingfisher has a number of real estate assets that it put up as collateral against its loans, including its office in financial hub Mumbai.

It posted a net loss of 7.55 billion rupees in the three months to December.

"We had given them many chances to come back with a specific positive action plan about their restart plans. But they could not come up with any concrete action plan," Acharya told reporters.

"The consortium felt that having waited so long, there is no reason for us to give further time to the company," he added.