The government has asked lenders to immediately start invoking personal guarantees of promoters to recover the dues in case companies have failed to repay the loans. The move comes amid the infamous Vijay Mallya row.
The notification is seen to point out that banks and the government are possibly easy towards the promoters, many of whom prefer luxuries over repaying loans. In a note sent to bank chiefs, the finance ministry said, “It has been observed that there is a less number of cases where action has been taken for recovery against guarantors for attachment of assets owned by them and sell the same for recovery of defaulted loan... it would be prudent to take steps against guarantors immediately when no sign of revival is visible.” It also pinned that the directive was issued after consultation with the RBI. “In the event of default in repayment or the loan by the borrower company, all the guarantors are liable to repay the guaranteed loan with interest as the liability of the guarantor is co-extensive with the principal debtor. The action can be taken against guarantor even without suing the principal debtor for recovery and even if the decreed amount in covered by mortgaged decree.”
The directive said if the guarantor has not created any security interest over his property, but the guarantor owns property and other assets, the banks should move Debt Recovery Tribunal for their attachment and sale.
