Letters to the editor dated August 28, 2020

The Finance Ministry’s directive to banks regarding personal guarantors to corporate loans (August 27) is timely. As per Section 128 of the Indian Contract Act, 1872, the liability of a guarantor is co-extensive with that of the principal debtor. Hence, following default in loan repayment by a borrower, a bank may proceed against the guarantor, even without exhausting the remedies against the former and even with respect to properties of guarantor, for which no security interest has been created favouring the bank.

Further, following the Supreme Court judgment in the Essar Steel case, personal guarantors to companies facing insolvency proceedings have also been brought under the purview of the IBC, even in case of debts under the resolution plan. However, for banks to take advantage of the favourable legal provisions, they need to have current data as to the assets owned by the guarantors. This is where their need to have a centralised database and for making optimum use of their IT systems comes in.

Following the nudge from the Finance Ministry and the lead provided by SBI, which recently invoked the personal guarantees of Anil Ambani to the loans availed of by RCom and Reliance Infratel, one hopes, the other banks too would follow suit, recover their dues from corporate borrowers and reduce their staggering NPAs.

Chennai

This refers to the report ‘Banks remaining extremely risk averse will be ‘self-defeating’, warns RBI chief” (August 28). No doubt the accumulated bad loans are huge. But tightening the restrictions on lending would further hurt the industrial, agricultural and commercial sectors and, as a consequence, the economy as a whole. Therefore, while making funds available to various sectors that need them, banks should ensure that prompt repayment takes place.

Coimbatore

This refers to the verdict of Bombay High Court’s Nagpur Bench on PM-CARES fund. The petitioner, claiming to be a contributor to PM-CARES fund, wanted weekly declaration of receipts and spending. The court rightly turned down the plea by stating that those having doubts on PM-CARES fund may avoid making contributions to the fund.

This should also be seen in background of the Prime Minister’s National Relief Fund (PMNRF) which, from the date of its establishment in 1948, has not made such declarations about receipts and spending even after the introduction of Right-To-Information (RTI) Act in the 2005.

New Delhi

This refers to ‘Handle with care’ (August 28). The Centre may be right in saying that though it is under constitutional obligation to pay GST revenue to States, it is unable to pay as it does not have enough GST compensation cess to pay from. But States are also within their right to seek money, and moreover it is not only due to Covid that the Centre has been slack in paying. Dues are pending for even the pre-Covid period.

Giving States the option of borrowing from the RBI is not such a good move. Ideally, the Centre must share some amount from its own funds.

Noida

India certainly needs electric vehicles to take off and reach critical mass within this decade. Our public transportation should ride on this technology for us to get the benefits promised by it. The technology supporting electric cars will evolve and converge towards an optimal state. We should welcome the government’s move to allow sales of vehicles without a built-in battery as consumers need not lock into a technology that is a work in progress yet.

The industry with subsidies from the Centre should work on developing a public charging infrastructure to start a virtuous cycle of adoption of electric mobility. The widespread availability of ATMs is a model to emulate as these are open to customers of any bank regardless of which bank set up the machine.

Bengaluru

LETTERS TO THE EDITOR Send your letters by email to bleditor@thehindu.co.in or by post to ‘Letters to the Editor’, The Hindu Business Line, Kasturi Buildings, 859-860, Anna Salai, Chennai 600002