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DoT Bars Operators from Taking Bank Guarantees

The Department of Telecommunications has directed telecom operators and their associations not to accept any bank guarantee from Axis Bank, including renewals. The directive was issued after the lender failed to invoke a bank guarantee after receiving a request from the telecom department.

The directive was issued to the Cellular Operators’ Association of India, Association of Unified Telecom Service Providers of India, Association of Competitive Telecom Operators, Internet Service Providers Association of India, and Virtual Network Operators of India. It was also copied to operators such as Bharti Airtel, Reliance Jio Infocomm, Vodafone India, Idea Cellular, Reliance Communications, and Aircel.

Telecom companies have to furnish bank guarantees as a commitment to fulfil their rollout obligations and other conditions as stipulated in the license. The exchequer encashes the bank guarantee in case of a default.

Axis Bank said that it did not release the bank guarantee in order to comply with a ruling by the telecom tribunal; the bank guarantees have been issued by them on behalf of Bharti Airtel. Payment of the said guarantees, at present, would be in violation of the orders of the Telecom Disputes Settlement and Appellate Tribunal. Once the order is vacated, the bank will be pleased to honor the said guarantees, as per the underlying terms. This matter has been communicated to DoT.

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