Waive promoters' personal guarantee under S4A Plan: Banks to RBI

Current guidelines don't allow lenders to grant fresh moratorium granted on interest repayment

Lenders have requested the Reserve Bank of India (RBI) to exempt companies where they are looking to implement Scheme for Sustainable Structuring of Stressed Assets (S4A) from furnishing promoters' personal guarantee.

Under the S4A scheme, the joint lender forum is required to obtain promoters personal guarantee before implementing the stress asset resolution plan.

Bankers said many of the companies are into stress for the reasons beyond their control and so the promoters may find it difficult to pledge their personal guarantees.

"For stressed companies, the factors causing the stress are beyond the control of the promoters and therefore, it is impractical to require furnishing of personal guarantee especially in case of listed companies. So, the requirement of furnishing personal guarantee must be waived," a source said.

Banks have also asked RBI to allow fresh moratorium or extend repayment schedule or reduction of rate of interest under the S4A resolution plan.

The current S4A guidelines do not allow lenders to grant fresh moratorium granted on interest or principal repayment.

These recommendation were made to the RBI in the meeting held yesterday to discuss stressed asset resolution plan.

In order to facilitate timely decision making for resolution of stressed assets, RBI, in a May 5 notification, had said that decisions agreed upon by a minimum of 60% of creditors by value and 50% of creditors by number in the JLF would be considered as the basis for deciding the corrective action plan (CAP), and will be binding on all lenders.

Lenders have suggested RBI to take into consideration ECB Lenders, financial institutions, NBFCs under the scheme as most of the stressed companies have large exposure from other lenders including ECB lenders, the source said.

The Tuesday's meeting was attended by heads of ICICI Bank, IDBI Bank, Axis Bank, HDFC Bank, Standard Chartered Banks and Canara Bank.

Senior officials from SBI and Bank of Baroda were also present in the meeting held at RBI here.