Banking

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Manali Jamgaonkar (Querist)
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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)
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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)
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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)
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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.

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Manali Jamgaonkar

Manali Jamgaonkar (Querist)
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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)
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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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