RBI may allow borrower-bank deal to shed tag of wilful defaulter

An RBI circular that requires lenders to take a quick call on classifying wilful defaulters will also allow borrowers to shake off the tag by entering into a compromise settlement with banks.

In June 2023, the central bank, in its circular on compromise settlements, had allowed one-time settlement of wilful defaults only if a higher authority approved it. The norms had caused controversy with bank unions and the Congress attacking the government over the new rules.

Recently, RBI came out with a draft master direction on the treatment of wilful defaulters. According to RBI, the objective is to provide for a non-discriminatory and transparent procedure, while complying with the principles of natural justice for classification of a borrower as a wilful defaulter by the lender.

“Any account included in the list of wilful defaulters, where the lender has entered into a compromise settlement with the borrower, shall be removed from the list only when the borrower has fully paid the compromise amount,” it stated.