Despite the IBC, recovery rates for public sector banks remain low. Analyse the role of guarantor insolvency in improving recoveries.

Part III of the IBC, 2016 was extended to personal guarantors of corporate debtors in November 2019. It lets banks pursue promoters who personally backed company loans. The Mumbai bench of the NCLT recently declared Videocon's V.N. Dhoot bankrupt on SBI's ₹12,668-crore claim [1]. The case shows how far this tool reaches, and also how little it may recover.

Why PSB recoveries remain low

• Delays reduce asset value: the NCLT has too few benches and many vacancies, so cases stall. This pushes banks back to SARFAESI and the DRTs [2].
• Large shortfalls after company resolutions: banks often accept steep haircuts when a company's case is resolved. Guarantor insolvency is meant to recover part of what remains unpaid.

How guarantor insolvency helps recovery

• A second route to recovery: approval of a company's resolution plan does not release the guarantor (Lalit Kumar Jain, 2021) [3].
• Legal certainty: Dilip B. Jiwrajka (2023) upheld Sections 95–100 against an Article 14 challenge. It held that the resolution professional only facilitates the process and does not decide it [4].
• One forum: the NCLT bench that hears the company also hears its guarantors, so the dispute is not split with the DRTs [5].
• Deterrence: personal bankruptcy brings a court-appointed trustee and disclosure of assets within 7 days [1]. This ends the "sick company, rich promoter" comfort and pushes promoters to settle early.

Limits of the guarantor route

• Very little money recovered: only ₹234.56 crore had been recovered from 64 resolved guarantor cases by June 2026. That is about 1% of admitted claims [6].
• The debtor writes the repayment plan, so creditors have little bargaining power. A bankruptcy order means negotiation has already failed.
• Assets far smaller than claims: one family's assets rarely cover guarantees worth thousands of crores, and assets can be moved while cases wait.
• Tribunal overload: over 5,100 guarantor applications [6] compete with company cases in an understaffed NCLT [7].

Way forward

• Dedicated IBC benches, with regular review of NCLT strength [7].
• IBBI's proposed safeguards: stopping related parties from voting on repayment plans, and making asset valuation compulsory [8].
• Early, parallel action: banks should invoke guarantees while the company case is still running, as the law permits [3], before assets disappear.

So far, guarantor insolvency has done more for promoter accountability than for recoveries. With enough tribunal capacity and early action by lenders, it can make every guarantee a real promise. That would advance the credit discipline the IBC aimed for and SDG 16's goal of effective institutions.