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  • Govt asks PSB to monitor cases where insolvency proceedings can initiated against individuals guarantors

    Published on August 27, 2020

    The Finance Ministry has asked public sector banks to monitor cases where insolvency proceedings could be initiated against individuals who are guarantors of corporate debtors that have defaulted on loans.

     
    The Insolvency and Bankruptcy Code (IBC) provides for a time-bound and market-linked resolution of stressed assets.

     
    The Code also provides for initiation of insolvency proceedings against personal guarantors of corporate debtors, even though the provision has not been used much by lenders to recover dues.


     In an advisory, the Department of Financial Services has asked Public Sector Banks (PSBs) to consider putting in place a mechanism for monitoring the cases which may require initiation of individual insolvency process before the National Company Law Tribunal (NCLT) against personal guarantors to corporate debtors.

     
    Recently, the NCLT’s Mumbai bench allowed State Bank of India (SBI) to initiate insolvency proceedings against Anil Ambani as a personal guarantor to recover Rs. 1,200 crore dues from two companies promoted by him.

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