Banks and MFIs clash over personal guarantee in CDR

Ahead of the deadline (June 06) for loan-restructuring as mandated by the Reserve Bank of India (RBI), promoters of microfinance companies (MFIs) and banks are yet to reach any agreement on whether corporate debt restructuring (CDR) is to be secured by Personal Guarantee, reported CNBC TV18 quoting sources.

Some micro lenders including Spandana Sphoorty are unwilling to issue any personal guarantee against corporate debt restructuring, said sources. Banks, which refused to recast MFI debt without personal gurantee seek the same in Asmita, Share Micro's CDR. The personal guarantee on loans is mandatory for promoters of MFIs. This means, a personal guarantor undertakes that he will repay the debt owed to the bank by another entity. Banks are trying to restructure loans, given to MFIs that have been going through some regulatory hurdles. They are now restricted to charge higher rate of interest to the lenders. Spandana Sphoorty's total debt stands at Rs 3,325 cr. India