THE RESERVE Bank of India (RBI) Thursday proposed that lenders should classify a borrower as a “wilful defaulter” within six months of their account being declared a non-performing asset (NPA). It did not earlier have a specific timeline within which such borrowers had to be identified.
The revision of norms comes after consideration of judgments and orders from the Supreme Court and High Courts, as well as representations and suggestions from banks and other stakehold- ers, the central bank said.
The RBI identifies wilful defaulters as those who have the ability to pay a bank’s dues but do not or divert bank funds. While large defaulter means a defaulter with an outstanding amount of *1 crore and above, and whose account has been classified as doubtful or loss, a wilful defaulter means a bor- rower or a guarantor who has committed wilful default and the outstanding amount is ₹25 lakh and above.
“The lender shall examine the ‘wilful default’ aspect in all ac- counts with outstanding amount of 225 lakh and above or as may be notified by the RBI from time to time, and complete the process of classification/declaring the borrower as a wilful defaulter within six (6) months of the ac- count being classified as NPA,” the RBI’s draft norms proposed.
It said the evidence of wilful default needs to be examined by an Identification Committee, to be set up by lenders.
The RBI also proposed that no additional credit facility be granted by any lender to a wilful defaulter or any entity with which a wilful defaulter is associated. The bar on additional credit facility shall be effective up to a year after the name of wilful defaulter has been removed from the List of Wilful Defaulters (LWD) by the lender.
“In addition, no credit facility shall be granted for floating of new ventures by any lender to a wilful defaulter or any entity with which a wilful defaulter is associ- ated for a period of five (5) years after the name of wilful defaulter has been removed from the LWD by the lender,” the RBI proposed. As per the norms, wilful defaulters will not be eligible for restructuring of credit facility.
On liability of a guarantor, the draft norms said, “When a default happens in making payment or repayment by the principal debtor GBr, the lender will be able to proceed against the guarantor even without exhausting the remedies against the principal debtor”.