RBI proposes changes in instructions dealing wilful defaulters

Reserve Bank of India has proposed changes in the instructions dealing wilful defaulters. In a press release, the RBI said, wilful defaulters must be defined as someone who has an outstanding amount of 25 lakh rupees and above and those who refuse to repay their loans despite having the capacity to pay. 

As per the revised guidelines, lenders will have to identify and label defaulting borrowers as "wilful defaulters" within six months of an account turning non-performing. It adds that wilful defaulters shall not be eligible for restructuring. The RBI said, banks must set up a review



committee and allow the borrower up to 15 days to make a written representation, as well as a chance for in-person hearing if needed. 

However, once an account is identified as a wilful defaulter, banks should not grant additional credit until a year after the tag is taken off.

The banking regulator has further proposed that Non-Banking Finance Companies should also be allowed to tag accounts using the same parameters. The RBI has sought comments on the new draft master directions by 31st of next month.