RBI issues Master Direction on treatment of wilful defaulters and large defaulters
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The Reserve Bank of India (RBI) has 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. Wilful defaulter means a borrower or a guarantor who has committed wilful default, and the outstanding amount is Rs 25 lakh and above.
It stated ‘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.’ 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.
Further, it 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. It added ‘No additional credit facility shall be granted by any lender to a wilful defaulter or any entity with which a wilful defaulter is associated.’
