More Stories

Informist, Tuesday, Jul 30, 2024

--RBI: Norms aim to warn lenders against financing wilful defaulters 
--RBI: Norms aim for system to spread wilful defaulters' credit data 
 

MUMBAI – The Reserve Bank of India today issued the final master directions on the treatment of wilful and large defaulters.

 

In September 2023, the central bank had issued draft guidelines on the treatment of wilful and large defaulters to expand the scope of classifying a borrower as a wilful defaulter by lenders.

 

"The primary objective of these directions is to provide for a non-discriminatory and transparent procedure, having regard to the principles of natural justice, for classifying a borrower as a wilful defaulter by the lenders," the RBI said.

 

The directions also aim to put in place a system to disseminate credit information about wilful defaulters to caution the lenders so that further institutional finance is not made available to such entities.

 

As per the norms, a lender shall identify and classify a person as a "wilful defaulter" after considering the track record of the borrowers and not on the basis of isolated transactions or incidents. The lender shall examine the "wilful default" aspect in all non-performing asset accounts with an outstanding amount of 2.5 mln rupees and above or as may be notified by the RBI from time to time.

 

All entities regulated by the RBI are mandated to submit information to all credit information companies in respect of the large defaulters at monthly intervals.

 

As per the new norms, if the third parties engaged by the lender have played a vital role in credit sanction or disbursement and are found negligent or deficient in their work or have facilitated the wilful default by the borrower, then the lender needs to forward the details of these third parties to the Indian Banks’ Association for record-keeping.

 

The lender, or the asset reconstruction company to which the account has been transferred, shall inform all credit information companies about the removal of the borrowers' name from the list of wilful defaulters, promptly and not later than 30 days, from the date when the outstanding amount falls below the threshold of 2.5 mln rupees or as notified by the RBI from time to time, the norms said.

 

With these directions coming into force, the previous 60 circulars issued regarding treatment of wilful defaulters and large defaulters stand repealed, the RBI said.  End 

 

Reported by Richard Fargose

Edited by Tanima Banerjee

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (22) 6985-4000 /+91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2024. All rights reserved.