By October 31st, RBI is requesting suggestions for changes to the “Wiful Defaulter Norms”
On Thursday, the Reserve Bank of India (RBI) suggested significant reforms to the laws governing persons who purposefully default on loans. It has been suggested that during six months of an account going into non-performance, lenders should designate delinquent borrowers as “wilful defaulters.”
At this moment, the RBI does not have a set deadline by which such debtors must be found. The RBI recommended on Thursday that banks form a review committee, give the borrower a 15-day notice to submit written comments, and provide an opportunity for an in-person hearing if necessary.
Banks reportedly won’t provide new credit to an account after it has been tagged as intentionally failing until a year has passed and the tag has been removed. A debt restructuring facility won’t be provided to such borrowers in addition to this.
The regulatory bank also instructed credit information providers to provide all lenders of information on borrowers who intentionally default. According to the central bank, wilful defaulters are those who have the capacity to pay a bank’s debts but choose to do so or wrongfully redirect bank money.
The new standard suggests allowing non-banking financing firms (NBFCs) to tag accounts using the same criteria and requiring a willful default sum of at least Rs 25 lakh. Before moving an account to another lender or an asset reconstruction facility, lenders would need to finish an inquiry into it to identify or rule out a wilful default, according to RBI. The proposal to designate them as willful defaulters and the reasons for it must be disclosed to the borrowers who are in control of and responsible for the administration of the company’s operations.
According to reports, any entities in which the willful defaulter is involved as a promoter, director, or as the person in charge of and accountable for the administration of the entity’s operations shall be assumed to be associated if the wilful defaulter is a person. Subsidiaries, joint ventures, and other such connected companies will also be considered willful defaulters if the parent business is.
By October 31st, the Reserve Bank is asking for comments on the proposed master directive.
