Post disastrous NPA problem faced by Indian bank and associated legal hurdles to recover loan, Indian banks changed their loan allocation strategy. As per the reports, they start asking for personal guarantee and trying to bring the promoters of the company under the ambit of personal accountability.
Reeling under more than $100 billion NPAS, Indian banking system cracked downwards and pulled the associated industries which impacted the overall growth. Even after few time of capital infusion by government to sore up the financial health of the banking system did not yield result. The change in approach by Indian banks will put many promoters on tight spot as the their personal assets are lower than the loan taken by their organization.
In my point of view, it is one of the initiative initiated by Indian Banks to protect their interest whereas promoters will stop allowing their owned companies to take unwarranted loans.
This will help to save the taxpayer's money.
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