Compromise settlement is not available to borrowers as a matter of right: RBI

The Reserve Bank of India (RBI) has plugged interpretation gaps in its recently issued circular on “Framework for Compromise Settlements and Technical Writeoffs”, clarifying “penal measures” and “minimum cooling period”, among others, through frequently asked questions.

This comes in the wake of bank unions opposing a clause in the circular that allows banks’ boards to take up proposals for compromise settlements in respect of debtors classified as fraud or wilful defaulter.

The central bank underscored that compromise settlement is not available to borrowers as a matter of right; rather, it is a discretion to be exercised by the lenders based on their commercial judgment.