NEW DELHI (BLOOMBERG) - India's Supreme Court sentenced Vijay Mallya to four months in jail and ordered him to deposit US$40 million (S$56 million), the latest legal setback for the former billionaire known as the "King of Good Times".

Mallya is out on bail in London, where he has been contesting extradition to India following his arrest in the British capital in 2017.

Mallya was charged with contempt of court, after he failed to repay debt owed to lenders led by the State Bank of India.

He was found guilty by India's Supreme Court in 2017 for transferring US$40 million to his children and failing to fully disclose his assets.

Mallya's sentencing in absentia is rare, as Indian laws require people to be present when a punishment verdict is handed out to them.

The top court decided to make an exception under its extraordinary powers, saying Mallya chose to not appear despite repeated opportunities since 2017.

Bad loans have weighed on Indian banks, and recoveries have been slowed by protracted legal and regulatory proceedings.

The Reserve Bank of India has warned that the gross non-performing asset ratio of lenders may rise as high as 9.5 per cent in September from 6.9 per cent in the same month last year.

The crackdown on Mallya is part of efforts by Indian lenders to recover dues from defaulting big businesses.

Indian lenders have targeted personal and business assets of dozens of businessmen, including Reliance Group's Anil Ambani, Dewan Housing Finance's Kapil Wadhawan and Bhushan Power & Steel's Sanjay Singal.

Among defaulters who fled the country, the Indian authorities are also seeking extradition of disgraced diamond tycoon Nirav Modi.

Mallya, whose empire spanned liquor to a cricket franchise and Formula One team, lost his fortune after a severe cash crunch at Kingfisher Airlines, the full-service carrier he founded in 2005 and was grounded seven years later.

He left India for London in 2016.