Banking

RBI issues directions for handling wilful defaulters

21.09.2023

The Reserve Bank of India (RBI) has introduced a scheme for handling wilful defaulters, effective from April 1, 1999. These guidelines were subsequently consolidated into the Master Circular on Wilful Defaulters, last updated on July 1, 2015.The draft Master Direction expands the scope for Regulated Entities which can classify borrowers as wilful defaulters, broadens the definition of wilful default, refines the identification process and mandates a review and finalisation on wilful default aspects within six months of an account being classified as a non-performing asset.

The primary objective of the Directions is to provide for a non-discriminatory and transparent procedure, while complying with the principles of natural justice for classifying a borrower as a wilful defaulter by the lenders. The directions also aim to put in place a system to disseminate credit information about wilful defaulters for cautioning lenders to ensure that further institutional finance is not made available to them.

The draft directions also addresses the treatment of wilful default loans sold to Assets Reconstruction Companies and their status under the Insolvency and Bankruptcy Code.The instructions on wilful defaulters have been revised after a review of the extant instructions and consideration of various judgments/ orders from the Hon'ble Supreme Court and Hon'ble High Courts, as well as representations/ suggestions received from banks and other stakeholders.

Tags : Master Direction Wilful Defaulters Scheme

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