Joint Bank Guarantee Scheme makes a return
Travel Agents Association of India (TAAI) has announced that the Joint Bank Guarantee (JBG) scheme has been approved by IATA’s Passenger Agency (PA) Conference, which will be effective from January 1, 2016. This scheme, which was discontinued on December 31, 2013, has been considered beneficial to TAAI’s membership since its introduction in 1992.
Reintroduction of the JBG scheme is said to be necessitated due to changes in insurance and the complexity and increasing costs of individual bank guarantees.
While speaking to Express TravelWorld, Sunil Kumar, president, TAAI, said, “The JBG scheme has been of immense help in many ways. The previous scheme offered members to do away with the hassles of liaising with banks for a bank guarantee. Banks charge heavy on a bank guarantee and also seek collateral, which was a burden. Those who preferred insurance scheme, in addition to the payment of insurance premium, found it difficult to get their capping increased due to seasonal sales or group movement.”
“The scheme served as a simpler way to have an agency covered and also offered flexibility on sales limit. The bigger benefit was that the entire deposit received from members was banked in a fixed deposit and the entire interest was considered profit for distributing back to members, in case there were no defaults,” he added.
Kumar further said, “In the current context as well, these will apply. Airlines will be monitoring sales of our member agencies with far more limitations attached, especially when the sales of the agencies go beyond the cover amount. Despite several members opting for higher insurance covers, insurance companies did not honour all members with this facility. The growing premium rate is another concern. Thus the problems are same and the scheme serves as a good option.”
Ajay Prakash, CEO, Nomad Travels and former president of Travel Agents Federation of India (TAFI), said, “When the scheme was first introduced, it helped the travel fraternity in numerous ways. Earlier, it was easier for travel agents due to low premium; it also protected airlines. There have been defaults too, but it was a good scheme altogether. Now the premium is increasing. I am not sure how much popular it will be in the future. Most people are now buying tickets from the consolidators. Let’s see how many people will join,” he added.
India is the first country in the world to offer Joint Bank Guarantee scheme as an alternate mode of financial security to IATA.