Obligations to deceased borrowers
Are banks able to alleviate the suffering of these terminally ill borrowers?
If you follow the rules, banks can get hold of the borrower’s security to meet their obligations. Here, the guarantors are legally required to repay the loan with interest if the borrowers do not repay it.
However, by keeping the rules apart, banks can go all the way to help these borrowers without getting their hands on their assets held as collateral. They can categorize these distressed borrowers and those who find themselves extremely exhausted, both financially and healthily, can enjoy special relief by forgoing their outstanding loan amount. Here, banks can take the corporate social responsibility (CSR) fund route to equalize the outstanding loans of these borrowers.
Of course, under the 2013 Companies Act, the CSR rules do not provide for such relief because such activities should not be linked to the core business of the bank. But there is always a way out. The bottom line is that the bank has an interest in helping these borrowers. The banking community is brought together under the banner of the Union Territory Bankers Committee (UTLBC). That all banks / FIs at UTLBC level pool part of their CSR funds and develop an appropriate plan to relieve these borrowers. There shouldn’t even be an obstacle to asking for an amendment to the 2013 CSR Act on these lines, if necessary.