Who is a Wilful Defaulter? RBI Guidelines – Notes for IBPS,RBI,SBI
Who is a Wilful Defaulter? RBI Guidelines – Notes for IBPS,RBI,SBI -This is the major concern for the Indian government as well as the Reserve Bank of India.
Due to the lacking government policies and less transparency in the Indian Banking system, it becomes quite difficult to foresee these defaulters and take the legal actions against them.
In this article, you will be able to know who the wilful defaulters actually are and how the banking system tackles with them. So read this article carefully as there are high chances that few questions may appear in your exams based on the information given below.
Who is the Wilful defaulter ?
The RBI has been initiating every effort to ensure that wilful default should not adversely affect the health of the banking system. The beginning of measures against wilful default started in 1999 when the Central Vigilance Commission’s instructions for collection of information on wilful defaults of Rs.25 lakhs and above. Since then, the RBI has asked banks and notified Financial Institutions to submit information on wilful defaulters.
Several modifications were made in the identification of wilful defaulters and the procedures that should be initiated against them. Recently, with the rising NPAs with the banking system, the case of wilful default is getting increased attention.
Who is a wilful defaulter?
Simply, default means non-payment of a loan availed by a borrower. A willful defaulter is an entity or a person that has not paid the loan back despite the ability to repay it.
Areas covered under wilful default
As per the RBI regulations, willful default covers several broad areas:
Deliberate non-payment of the dues despite adequate cash flow and good networth
Siphoning off of funds to the detriment of the defaulting unit, Assets, and proceeds have been misutilised;
Misrepresentation/falsification of records;
Disposal/removal of securities without bank’s knowledge
Fraudulent transactions by the borrower.
What is the wilful default?
Though willful default covers the above mentioned broad areas, the major instance is non-repayment of loan availed despite the ability to pay the loan. Hence, it is in the sense of non-repayment of debt that willful default is seriously defined.
A ‘wilful default’ would be deemed to have occurred if any of the following events is noted:
(a) The unit has defaulted in meeting its payment/repayment obligations to the lender even when it has the capacity to repay.
(b) The unit has defaulted in meeting its payment/repayment obligations to the lender and has not utilized the finance from the lender for the specific purposes for which finance was availed of but has diverted the funds for other purposes.
(c) The unit has defaulted in meeting its payment/repayment obligations to the lender and has siphoned off the funds so that the funds have not been utilized for the specific purpose for which finance was availed of, nor are the funds available with the unit in the form of other assets.
(d) The unit has defaulted in meeting its payment/repayment obligations to the lender and has also disposed of or removed the movable fixed assets or immovable property given for the purpose of securing a term loan without the knowledge of the bank/lender.
According to the RBI regulations, the identification of the wilful default should be made keeping in view the track record of the borrowers and should not be decided on the basis of isolated transactions/incidents. The default to be categorized as wilful must be intentional, deliberate and calculated.
Recent News Related to the Wilful Defaulters of the Bank-
The CBI is probing a scam in which about 360 farmers and others from Andhra Pradesh and Adilabad district of Telangana allegedly borrowed Rs540 crore from the Industrial Development Bank of India (IDBI) in two instances of cheating.
The number of wilful defaulters, who did not repay loans to public sector banks (PSBs)despite the capacity to do so, rose to 9,063 at the end of December 2017.
At a time when Punjab National Bank (PNB) is dealing with absconding loan defaulter Nirav Modi, it also has to deal with a list of nearly Rs 14,594 crore worth of wilful defaulters on its books. The list has a total number of 1,085 wilful defaulters with over Rs 25 lakh loans as on January end 2018. This is over 17 percent increase from a year ago period.
The country’s largest lender, SBI, accounts for over 27 percent of the total amount owed to public sector banks by wilful defaulters. As many as 1,762 wilful defaulters owed SBI Rs. 25,104 crore as on 31st March 2017.