K R Srivats : BL 10 July 2013
This exercise has now been extended to the guarantors
of loan defaulters as well as part of efforts to build pressure
on the borrowers to clear their dues.
Mid-size public sector banks are going a step beyond their larger peers in loan recovery. They are ‘naming and shaming’ the guarantors, no doubt encouraged by the Finance Minister’s recent advice to banks to go after big defaulters.
Lenders such as Allahabad Bank have started publishing photographs of guarantors in the public notices (newspaper advertisements) they put out for sale of properties mortgaged with them for the loan.
On Tuesday, an Allahabad Bank advertisement for sale of an immovable property to recover about Rs 365 crore included photographs of two guarantors.
State Bank of India, the country’s largest commercial bank, has for some time now been publishing photographs of loan defaulters to shame them into paying up. UCO Bank has also adopted this approach.
Currently, there are no specific guidelines under the SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) law or rules on how guarantors should be treated.
COURTS’ VIEW
But recent High Court judgments have strengthened the banks’ hands on naming and shaming of guarantors to recover their dues. Several High Courts, including the Madras High Court, have held that banks can publish photographs of guarantors in newspaper advertisements, say legal experts.
With large banks adopting the strategy of publishing photographs to put pressure on defaulters, even mid-size and small banks are now looking to follow suit, said sources in the banking industry.
The RBI has authorised banks to go after both borrowers and guarantors of loans. In the eyes of law, both are to be treated on an equal footing.
When a notice is sent to a defaulting borrower under SARFAESI law, the guarantor is also informed simultaneously.
(This article was published on July 9, 2013)
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