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Policy and regulations

SC asks runaway guarantors to pay. Will this change the corporate borrower-lender equation?

SC asks runaway guarantors to pay. Will this change the corporate borrower-lender equation?
SC asks runaway guarantors to pay. Will this change the corporate borrower-lender equation?
Concept by Kankana Roy Choudhury and Muhabit ul haq via AI

Synopsis

Lenders have celebrated the recent Supreme Court decision validating provisions in bankruptcy law, enabling them to recover from personal guarantees by corporate debtor promoters. The order is seen to correct an injustice that permits businessmen to transfer enterprise losses to banks while retaining profits.

For years, critics of capitalism and free markets have highlighted how big businessmen privatise profits and distribute losses to the public. J. Paul Getty, an American industrialist from the 1940s, famously said: “If you owe the bank USD100, that’s your problem; if you owe the bank USD100 million, that is the bank’s problem.” Reserve Bank of India’s (RBI) former governor Raghuram Rajan provided his version: “There may be sick companies, but no
( Originally published on Dec 06, 2023 )
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The Economic Times