Why personal-guarantor recoveries are so tiny — and why Chandra’s was tinier still
The article examines why personal-guarantor insolvency cases in India result in extremely low recovery rates for lenders. It highlights that personal guarantees often lack underlying asset security, leading to significant value erosion between the time of the loan and the insolvency process.
Why it matters
It sheds light on the limitations of personal guarantees in corporate insolvency, explaining why creditors often recover only a fraction of admitted claims.
Subhash Chandra’s proposed repayment of a little over Rs 6 crore against more than Rs 22,000 crore of admitted claims worked out to less than 0.03%.That looks exceptionally small. And it was. But personal-guarantor insolvency cases have produced very low recoveries more generally.Data from the insolvency regulator shows that nearly 5,200 applications have been filed against personal guarantors since the process came into force in 2019-20. Only around 64 have so far ended in repayment plans approved by creditors and the tribunal.
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