Letters: Use with discretion

With reference to Dev Chatterjee and Abhijit Lele's report, "Banks want promoter's guarantees for new loans" (September 20), mounting pressure due to rising stressed assets is prompting lenders to ask for personal guarantee from promoters and chief executive officers of companies while offering fresh credit facilities or rescheduling existing facilities to borrowers. However, to what extent the personal guarantee is worthy is a matter that can be analysed only when lenders go for the realisation of personal assets.

Obviously, all outstanding non-performing assets have not risen because of financial mismanagement or malfeasance. Therefore, while granting and delivering credit facilities, it is imperative that bankers assess and recognise a particular client's need to obtain various primary and additional securities to secure his or her debt.

Asking for personal guarantee may discourage entrepreneurs from starting a new business enterprise or taking over an existing one. Under the Strategic Debt Restructuring scheme, bankers must desist from obtaining personal guarantee, else the scheme might become unviable. Lenders must be free to decide whether they want personal guarantee.

Instead of generalising the condition of personal guarantee it must be considered on a case-to-case basis. If need be, the guarantee should be easily monetisable, and must fetch enough proceeds to liquidate outstanding debts.

V S K Pillai Changanacherry

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