NEW DELHI: The Reserve Bank of India on Thursday issued revised draft norms for banks and financial institutions to deal with wilful defaulters.
According to the RBI proposal, banks have to examine large accounts to see if borrowers are sitting on cash and not repaying. RBI suggests that lenders identify wilful defaulters within six months of the loan turning bad.
RBI identifies any borrower who has defaulted Rs 25 lakh or more despite having the capacity to repay as a wilful defaulter. Under the proposed norms, if the borrower has siphoned off funds or sold assets given as security for loan, the wilful defaulter tag will be slapped.
The tag will also apply if a borrower has failed to honour the commitment given to the lender to infuse equity.
The same fate awaits guarantors who fail to honour their guarantee.
RBI has proposed a separate category of defaulters with outstanding above Rs 1 crore. Earlier, the guidelines on wilful defaulters were meant for scheduled commercial banks and financial institutions.
The revised draft norms have bigger scope and are applicable to lenders (banks, NBFCs), asset reconstruction companies, and credit information companies.
Once a person or entity is identified as a wilful defaulter, criminal action will follow. These are draft norms, open to feedback from stakeholders. RBI will evaluate suggestions and release final norms later.