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This directive comes after SBI approached the NCLT to initiate a case against Reliance Group chairman Anil Ambani. (Mint)
This directive comes after SBI approached the NCLT to initiate a case against Reliance Group chairman Anil Ambani. (Mint)

SBI case triggers FinMin directive

  • PSBs asked to monitor cases for individual bankruptcy
  • Dept of financial services says that the IBC rules empower creditors to submit insolvency filings

MUMBAI : The finance ministry has asked public sector banks to put in place a mechanism to monitor cases where they might need to file individual insolvency petitions against personal guarantors.

This directive comes after State Bank of India (SBI) approached the National Company Law Tribunal (NCLT) to initiate a similar case against Reliance Group chairman Anil Ambani in which he guaranteed loans of 1,200 crore from SBI for Reliance Communications Ltd and Reliance Infratel Ltd, which later turned non-performing.

In a notification on 26 August, a copy of which has been seen by Mint, the department of financial services said that the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019, empowers creditors to file insolvency applications against personal guarantors to corporate debtors.

“In this connection, banks may consider putting in place a mechanism to monitor cases that may require initiation of individual insolvency process before NCLT against personal guarantors to corporate debtors," the notification said.

Banks may also consider setting up IT systems to collate data regarding personal guarantors in all such cases for the requisite follow-up and consequential action, it said.

The finance ministry directive could nudge public sector banks to consider this course of action more proactively, according to experts.

“The corporate insolvency resolution process commenced against corporate debtors have either yielded a resolution or resulted in the liquidation of such corporate debtors. In most cases, there has always been a gap between the amounts recovered by the lenders and the amounts owed to them by the corporate debtor," said Ajay Shaw, partner, DSK Legal. The advisory, he said, would prompt personal guarantors to attempt a compromise with lenders either under the repayment plan or a one-time settlement.

shayan.g@livemint.com

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