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Banks want promoters' guarantee for new loans

Stressed assets sale stalled as bidders refused to give such guarantees

To ring-fence risk, Indian are increasingly asking of with high debt to give personal guarantees on fresh or during rescheduling of loans. This is to force to repay as corporate guarantees are not enough for recovering from defaulters, say bankers.

A senior executive with said while restructuring loans, additional funding is provided, but a personal guarantee is also asked for as additional security so that stand by commitments. “Personal guarantees are a way of ensuring have skin in the game and implement the turnaround plan and repay loans,” the SBI official said, asking not to be named. The sale of Lanco’s assets and Steels by is stuck as bidders refused to give personal guarantees, said a banker close to the development. of large but highly indebted groups are also being asked to give such guarantees when seeking to reschedule loans.  But, the response has been poor with many refusing to do so, leading to a stalemate. Last week, Union Finance Minister Arun Jaitley acknowledged that public sector (PSBs) were finding it hard to get buyers for stressed assets.

The move comes after Vijay Mallya, chairman of the UB group, fled to in March after a default. moved the to recover Rs 9,100 crore from Mallya, who had given a personal guarantee on a loan for the now defunct Airlines. Based on the guarantee, are selling personal assets of Mallya to recover their loans, but this will not be enough to cover the entire loan.

Indian banks’ non-performing assets or (see chart) have been rising in the past few years, and they are forcing to sell assets. For example, asked corporate groups like group to sell assets to recover loans. sold its cement units to group’s for Rs 20,000 crore. Chief executive officers, on the other hand, argue that all the stressed assets are not a result of mismanagement or diversion of funds and, hence, personal guarantees are not required. Many companies, chief executive officers said, fell into bad times because of difficult global conditions, or cancellation of mines and telecom licences by courts.

Banks want promoters' guarantee for new loans
In their asset quality review, have identified around 150 stressed assets and any change in loan structuring now requires a personal guarantee. “Even when a new promoter is coming to a project and the company is part of the corporate debt restructuring programme, are asking for personal guarantees,” said a banker.

According to corporate debt restructuring  (CDR) cell data, there were 530 cases till March 2015 of seeking to restructure debt totalling Rs 4.03 lakh crore without classifying these accounts as NPAs.

The strategic debt restructuring (SDR) scheme launched by the in June 2015 sought to convert a part of bank of an ailing company into equity, with the owning at least 51 per cent. But, many failed to receive a buyer because of these conditions.

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Business Standard
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Business Standard

Banks want promoters' guarantee for new loans

Stressed assets sale stalled as bidders refused to give such guarantees

Dev Chatterjee & Abhijit Lele  |  Mumbai 

Banks want promoters' guarantee for new loans

To ring-fence risk, Indian are increasingly asking of with high debt to give personal guarantees on fresh or during rescheduling of loans. This is to force to repay as corporate guarantees are not enough for recovering from defaulters, say bankers.

A senior executive with said while restructuring loans, additional funding is provided, but a personal guarantee is also asked for as additional security so that stand by commitments. “Personal guarantees are a way of ensuring have skin in the game and implement the turnaround plan and repay loans,” the SBI official said, asking not to be named. The sale of Lanco’s assets and Steels by is stuck as bidders refused to give personal guarantees, said a banker close to the development. of large but highly indebted groups are also being asked to give such guarantees when seeking to reschedule loans.  But, the response has been poor with many refusing to do so, leading to a stalemate. Last week, Union Finance Minister Arun Jaitley acknowledged that public sector (PSBs) were finding it hard to get buyers for stressed assets.



The move comes after Vijay Mallya, chairman of the UB group, fled to in March after a default. moved the to recover Rs 9,100 crore from Mallya, who had given a personal guarantee on a loan for the now defunct Airlines. Based on the guarantee, are selling personal assets of Mallya to recover their loans, but this will not be enough to cover the entire loan.

Indian banks’ non-performing assets or (see chart) have been rising in the past few years, and they are forcing to sell assets. For example, asked corporate groups like group to sell assets to recover loans. sold its cement units to group’s for Rs 20,000 crore. Chief executive officers, on the other hand, argue that all the stressed assets are not a result of mismanagement or diversion of funds and, hence, personal guarantees are not required. Many companies, chief executive officers said, fell into bad times because of difficult global conditions, or cancellation of mines and telecom licences by courts.

Banks want promoters' guarantee for new loans
In their asset quality review, have identified around 150 stressed assets and any change in loan structuring now requires a personal guarantee. “Even when a new promoter is coming to a project and the company is part of the corporate debt restructuring programme, are asking for personal guarantees,” said a banker.

According to corporate debt restructuring  (CDR) cell data, there were 530 cases till March 2015 of seeking to restructure debt totalling Rs 4.03 lakh crore without classifying these accounts as NPAs.

The strategic debt restructuring (SDR) scheme launched by the in June 2015 sought to convert a part of bank of an ailing company into equity, with the owning at least 51 per cent. But, many failed to receive a buyer because of these conditions.

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Banks want promoters' guarantee for new loans

Stressed assets sale stalled as bidders refused to give such guarantees

Stressed assets sale stalled as bidders refused to give such guarantees To ring-fence risk, Indian are increasingly asking of with high debt to give personal guarantees on fresh or during rescheduling of loans. This is to force to repay as corporate guarantees are not enough for recovering from defaulters, say bankers.

A senior executive with said while restructuring loans, additional funding is provided, but a personal guarantee is also asked for as additional security so that stand by commitments. “Personal guarantees are a way of ensuring have skin in the game and implement the turnaround plan and repay loans,” the SBI official said, asking not to be named. The sale of Lanco’s assets and Steels by is stuck as bidders refused to give personal guarantees, said a banker close to the development. of large but highly indebted groups are also being asked to give such guarantees when seeking to reschedule loans.  But, the response has been poor with many refusing to do so, leading to a stalemate. Last week, Union Finance Minister Arun Jaitley acknowledged that public sector (PSBs) were finding it hard to get buyers for stressed assets.

The move comes after Vijay Mallya, chairman of the UB group, fled to in March after a default. moved the to recover Rs 9,100 crore from Mallya, who had given a personal guarantee on a loan for the now defunct Airlines. Based on the guarantee, are selling personal assets of Mallya to recover their loans, but this will not be enough to cover the entire loan.

Indian banks’ non-performing assets or (see chart) have been rising in the past few years, and they are forcing to sell assets. For example, asked corporate groups like group to sell assets to recover loans. sold its cement units to group’s for Rs 20,000 crore. Chief executive officers, on the other hand, argue that all the stressed assets are not a result of mismanagement or diversion of funds and, hence, personal guarantees are not required. Many companies, chief executive officers said, fell into bad times because of difficult global conditions, or cancellation of mines and telecom licences by courts.

Banks want promoters' guarantee for new loans
In their asset quality review, have identified around 150 stressed assets and any change in loan structuring now requires a personal guarantee. “Even when a new promoter is coming to a project and the company is part of the corporate debt restructuring programme, are asking for personal guarantees,” said a banker.

According to corporate debt restructuring  (CDR) cell data, there were 530 cases till March 2015 of seeking to restructure debt totalling Rs 4.03 lakh crore without classifying these accounts as NPAs.

The strategic debt restructuring (SDR) scheme launched by the in June 2015 sought to convert a part of bank of an ailing company into equity, with the owning at least 51 per cent. But, many failed to receive a buyer because of these conditions.
image
Business Standard
177 22

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