RBI Orders Banks to Check 'Wilful Default' in NPA Accounts

Mumbai, Jul 30 (PTI) The RBI on Tuesday issued a Master Direction on the Treatment of Wilful Defaulters and Large Defaulters under which banks and NBFCs will have to examine the 'wilful default' aspect in all non-performing asset accounts with outstanding amounts of Rs 25 lakh and above.

A lender will identify and classify a person as a 'wilful defaulter' by following a specified procedure. The evidence of wilful default will be examined by an identification committee, according to the direction.

'Wilful defaulter' means a borrower or a guarantor who has committed wilful default, and the outstanding amount is Rs 25 lakh and above.

"The lender shall examine the 'wilful default' aspect in all NPA accounts with an outstanding amount of Rs 25 lakh and above...from time to time," it said.

If a wilful default is observed in the internal preliminary screening, the lenders will complete the process of classification/declaring the borrower as a wilful defaulter within six months of the account being classified as NPA.

The Master Direction further said the lenders should formulate a non-discriminatory board-approved policy that clearly sets out the criteria based on which the photographs of persons classified and declared as wilful defaulters shall be published.

"No additional credit facility shall be granted by any lender to a wilful defaulter or any entity with which a wilful defaulter is associated," it added.

The bar on the additional credit facility to a wilful defaulter or any entity with which a wilful defaulter is associated would be effective for one year after the name of the wilful defaulter has been removed from the List of Wilful Defaulters (LWD) by the lender.

The RBI said the primary objective of the 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 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 Reserve Bank said.

These directions will be effective after 9o days.