According to the sources with direct knowledge of the matter, the Department of Financial Services (DFS) has written a letter to Chairmen and heads of the banks on August 26, asking them to consider setting up of an IT system to collate such data,
The IBC code amendment 2019 allows creditor to permits file insolvency application against personal guarantors before the NCLT.Therefore, the letter of August 26, 2020 from DFS to lenders in this context says “Banks may consider putting in place a mechanism for monitoring the cases which may require initiation of individual insolvency process before the National Company Law Tribunal (NCLT) against personal guarantors to corporate debtors.” The letter further says that “Banks may also consider setting up an IT system to collate data regarding personal guarantors in all such cases for the requisite follow up and consequential”. The above advisory from DFS appears to be to ensure banks explore all avenues of realising their loans, in view of government has suspended for six months, beginning March 25, sections 7, 9 and 10 of the Insolvency & Bankruptcy Code to prevent borrowers from being dragged into insolvency.
Section 7 provides a financial creditor to initiate a corporate insolvency resolution process against a corporate debtor, Section 9 makes available for application of insolvency by an operational creditor, and Section 10 is for initiation of insolvency resolution proceedings by a corporate applicant.
