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of <h1>RBI Issues Guidelines on Personal Guarantees for Loans, Emphasizing Fair Practices for Public and Closely Held Companies.</h1> The Reserve Bank of India issued guidelines to scheduled commercial banks and term lending institutions regarding the necessity of personal guarantees from directors of companies when sanctioning loans. The guidelines suggest that personal guarantees should not be routinely required, especially for public limited companies with satisfactory management and financial positions. However, guarantees may be necessary for closely held companies, those with unsatisfactory financial positions, or where management continuity is crucial. If guarantees are warranted, the borrowing company and guarantors must ensure no compensation is exchanged for the guarantee. These guidelines aim to refine the loan approval process and ensure fair practices.
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