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Defaulters of 1 bank considered as defaulter by all banks: FM

The purpose of the rule is to stop companies from taking banks for granted and encourage them to make payments on time

June 13, 2012 3:17 IST | India Infoline News Service
According to the guidelines issued by the finance ministry, if a borrow fails to repay his loan to the bank, then his account would automatically become ineligible for loan from other banks in future. The guidelines were issued by the ministry earlier this month.  
The purpose of the rule is to stop companies from taking banks for granted and encourage them to make payments on time.
“Since the counter-party for all lenders is the same, the status of the borrower across all lenders shall have to be same,” the finance ministry said to all government banks in a circular. “The move is aimed to prevent undue leverage in the hands of the borrower and will also incentivise early resolution of any irregularity with all the lenders,” the circular added.
The circular said, all loans above Rs. 1.5 billion to a single borrower should be brought under the scope of a joint lending arrangement in six months, and the bank that has the largest share of the debt should lead the consortium.
It further added, pricing of the loan should be uniform among all member banks. No member bank would waive the penal interest or vary the margin stipulated unilaterally.

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