Obligations to Deceased Borrowers
Will banks be able to alleviate the suffering of such terminally ill borrowers?
If you stick to the rules, banks can take the borrower’s safety into their own hands to realize their fees. Here the guarantors are legally obliged to repay the loan including interest if the borrower does not repay it.
However, if the rules are kept apart, banks can help such borrowers to any extent without touching their collateralized assets. You can categorize such troubled borrowers and those who are extremely financially and healthily exhausted can be particularly relieved by waiving their outstanding loan amount. This is where banks can go the route of Corporate Social Responsibility (CSR) funds to square the outstanding loan amount of such borrowers.
Of course, the CSR rules according to the ACT 2013 do not provide for such relief for companies, since such activities should not be linked to the core business of the bank. But there is always a way out. The main thing is that the bank should have an interest in helping these borrowers. The banking community operates under the banner of the Union Territory Level Bankers Committee (UTLBC). Have all banks / FIs at UTLBC level pool some of their CSR funds and work out a suitable plan to relieve such borrowers. Even a change in the CSR Act 2013 in this direction should be possible without any problems if necessary.