24 May Guarantor beware(Polity, GS-2, Law, The Hindu)
Context:- The Supreme Court judgment of:- upholding creditors’ right to proceed against personal guarantors to loans provided by them to a corporate borrower. This will help in lifting the uncertainty over the extent to which banks and other financial lenders can pursue.
Why this is a good move:-
- Corporates are the guarantor in thousands of crore rupees.
- When corporates will become liable then they will pressurise the debtors
- In this case there will be successful execution of IBC code.
- It will help the banks in recovering the loans
- resolution plan for the corporate debtor does not extinguish the personal guarantor’s liability
How to solve the NPA issue in indian banking system
- PARA a bad bank as recommended by the economic survey.
- A comprehensive communication and a data scruitnise before lending
- A clear communication between the banks so that same loan can’t be disbursed by the banks
- A quick resolution process.
- Banks have to accept losses on loans so that RBI will get to know about the real situation.
- With out fear of 3C i.e. CVC, CBI, Courts
- The Indian Banks’ Association has set up a six-member panel to oversee resolution plans of lead lenders. To expedite resolution, more such panels may be required.
An alternative is to set up a Loan Resolution Authority, if necessary through an Act of Parliament.
Download Daily Current Affairs of 24th May 2021
Plutus IAS Current Affair Team Member
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