Page 47 - Banking Finance September 2022

ARTICLE

Some of the important precautionary measures course if no guarantee had been furnished by the Trust.
Bank shall, in particular, refrain from any act of omission
in "Subordinate debt for Stressed MSMEs":
or commission, either before or subsequent to
To evaluate credit applications by using prudent banking
invocation of guarantee, which may adversely affect the
judgement for selecting commercially viable proposals
interest of the Trustee Company as the guarantor. In
and conduct the account(s) of the borrowers with
particular, the Bank should intimate the Trust while
normal banking prudence.
entering into any compromise or arrangement, which
To closely monitor the borrower account and put in all
may have effect of discharge or waiver of personal
required efforts to ensure that the account is serviced
guarantee(s) or security.
regularly.
To ensure either through a stipulation in an agreement/
To conduct periodical inspection of securities (prime and
undertaking with the borrower or otherwise, that it
collateral) for ensuring that the securities are in good
shall not create any charge on the security held in the
and enforceable condition in line with the terms of
account covered by the guarantee for the benefit of any
sanction.
account not covered by the guarantee, with itself or in
To ensure that the credit facility sanctioned under the favour of any other creditor(s) without intimating the
scheme is not to be wholly or partly utilized for Trust. Further the Branch shall secure for the Trust or
adjustment of any previously outstanding debts, over its appointed agency, through a stipulation in an
dues to the Bank including those deemed debts bad or agreement / undertaking with the borrower or
doubtful of recovery. otherwise, the right to list the defaulted borrowers'
names and particulars on the Website of the Trustee
To ensure that the guarantee claim in respect of the
company.
credit facility and borrower is lodged with the Trust in
the form and in the manner and within such time as To hold on record all such statements, documents,
may be specified by the Trust in this behalf and that receipts, certificates and other writings with regard to
there shall not be any delay on its part to notify the regular operations in the account/ functioning of the
default in the borrowers account which shall result in unit, it's viability, financials etc. Inspection may be
the Trust facing higher guarantee claims. carried out either through the officers of the Trust or
of SIDBI (in case of Institutions other than SIDBI) or any
In the event of default, Bank shall exercise its rights, if
other person appointed by the Trust for the purpose of
any, to take over the assets of the borrower and the
verification of guarantee coverage/ claim coverage etc.
amount realized, if any, from the sale of such assets
The indicative list may include Power bills, Tax paid
would be first used to settle senior debt. Any
receipts, GST Returns, latest available audited
subsequent amount left post settlement of senior debt
financials, IT returns, pre / post sales, inflow of stock &
would be appropriated between trust and Bank in the
book debts, bills /vouchers etc.
ratio of extent of guarantee coverage.
To exercise all the necessary precautions and maintain
Conclusion:
its recourse to the borrower for entire amount of credit
Earlier, due to absence of any guidelines for financial support
facility owed by Bank and initiate such necessary actions
to NPA or, stressed viable units, Bankers were unable to take
for recovery of the outstanding amount, including such
any decision. Sub-ordinate debt for stressed MSMEs is
action as may be advised by the Trust.
opening a gateway for viable stressed or, NPA accounts.
To recover the entire outstanding amount of the credit
from the borrower, the guarantee claim should not take
In several instances, it has been found that support of small
away the responsibility of recovering the loan dues.
fund may help the company in its revival process. This
To exercise the same diligence in recovering the dues scheme is going to play a very important role in revival of
and safeguarding the interest of the Trust, in all the sick MSME units either in NPA or, stressed condition if
ways open to it as it might have exercised in the normal persistence of viability is diligently established.

BANKING FINANCE | SEPTEMBER | 2022 | 47