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Manali Jamgaonkar (Querist)

10 March 2014 Kindly guide me for the following:
A has taken loan from bank & B is the guarantor for that loan. Also at the same time B takes the loan with A as guarantor.

Whether such cross guaranteeing is allowed?

Nikhil Kaushik

Nikhil Kaushik (Expert)

10 March 2014 i dont think there is any restriction for the same as far as individuals, firms is concerned. please check operation of section 185/186 of companies act with relation to restrictions imposed by companies act.

Manali Jamgaonkar

Manali Jamgaonkar (Querist)

10 March 2014 Hi Nikhil,
Thanx for the immediate reply.
But dont you there is risk in case the loan is not repaid within due date?

Nikhil Kaushik

Nikhil Kaushik (Expert)

10 March 2014 well that is the risk that banks need to account for in their credit risk assessment, something that normally Indian banks are not very good at.

Message likes : 1 times

Manali Jamgaonkar

Manali Jamgaonkar (Querist)

10 March 2014 Hi Nikhil,
Thanx for the immediate reply.
But dont you there is risk in case the loan is not repaid within due date?

Nikhil Kaushik

Nikhil Kaushik (Expert)

10 March 2014 as I said before, well that risk is always there...

anyways guarantees are not something that save the banks from defaults...what you need a good cash flow backed by marketable securities as collateral.

guarantees and land etc are difficult to invoke and dispose off.

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