Banks and borrowers run into individual loan guarantees

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The State Bank of India (SBI) has used guarantees on 16 occasions to recover about Rs 20,000.

Synopsis

Banks say they require proper documentation because several promoters have placed their assets with a trust company or moved sales proceeds to foreign countries after promising property, shares and other assets as part of a personal guarantee.

Mumbai: Banks and borrowers are involved in a personal safeguard tug of war after the Supreme Court allowed invoking personal safeguards against defaulting promoters. While lenders are asking founders to provide a negative lien letter on assets they own, promoters are resisting as their personal assets are bound to be auctioned off in the event of a default, despite the companies’ limited liability. “We

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