New Delhi: The Supreme Court on Tuesday dismissed the petition filed seeking direction to public sector banks to enforce defaulters’ personal guarantees. As per the sources following the instructions of the Finance Ministry, state-owned banks are ready to implement personal guarantees given by about 300 promoters for corporate loans.
According to the source, the list of such promoters has been prepared by the banks and is likely to be sent in the first week of October. However, Supreme Court dismissed a petition seeking direction for the public sector banks to invoke personal guarantees of the defaulters.
Supreme Court dismisses a petition seeking direction for the public sector banks to invoke personal guarantees of the defaulters.
— ANI (@ANI) September 22, 2020
After the meeting between the finance ministry and public sector banks on August 26, the finance ministry asked state-owned banks to prepare a list of cases where the promoters’ personal guarantee can be invoked under the revised Insolvency Resolution Procedure Rules 2019 can be implemented. This revised rule has enabled lenders to file bankruptcy applications against individual guarantors of corporate loans before NCLT.
A personal guarantee obliged the guarantor to pay off a business loan if the corporate borrower defaults. In such cases, the promoters usually provide personal assets as collateral. As per industry estimates, promoters have provided personal guarantees to state-run banks for arrears of Rs 1.85 lakh crore.