India's central bank late Tuesday said individuals or companies acting as guarantors to a loan could be declared willful defaulters if they refuse to pay back despite having the means to do so.
"As such, where a banker has made a claim on the guarantor on account of the default made by the principal debtor, the liability of the guarantor is immediate," the Reserve Bank of India said in a circular on its website.
The banking sector regulator has asked banks to crack down on companies that willfully default. Banks have seen a surge in bad loans as slowing economic growth and high interest rates have pushed many companies to default on repayments. A willful defaulter can't access any loan from banks or other financial institutions.
The rules will be effective for all future contracts, the RBI said.Source:http://online.wsj.com/
"As such, where a banker has made a claim on the guarantor on account of the default made by the principal debtor, the liability of the guarantor is immediate," the Reserve Bank of India said in a circular on its website.
The banking sector regulator has asked banks to crack down on companies that willfully default. Banks have seen a surge in bad loans as slowing economic growth and high interest rates have pushed many companies to default on repayments. A willful defaulter can't access any loan from banks or other financial institutions.
The rules will be effective for all future contracts, the RBI said.Source:http://online.wsj.com/
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