RBI, vide notifications dated July 30, 2024, has issued the RBI (Treatment of Wilful Defaulters and Large Defaulters) Directions, 2024 ("Wilful Defaulter Directions"), and these directions will come into force after 90 (ninety) days from placing it on the website of RBI. The Wilful Defaulter Directions aim to provide for a non-discriminatory and transparent procedure for classifying a borrower as a 'wilful defaulter', and to disseminate credit information about wilful defaulters for cautioning the lenders. Some of the key provisions under the Wilful Defaulter Directions are as follows:
- the provisions regarding wilful defaulters and large defaulters are applicable to all RBI regulated entities irrespective of whether they fall within the definition of 'lender' as provided in the Wilful Defaulter Directions or not;
- the Wilful Defaulter Directions provide for a mechanism for identification and classification of defaulters: (i) wilful defaulters: where the total outstanding is above INR 25,00,000 (Indian Rupees twenty-five lakh) ; and (ii) large defaulters: where the outstanding is above INR 1,00,00,000 (Indian Rupees one crore), or as notified by the RBI;
- wilful defaulters are to be classified based on their track-record and not on the basis of isolated transactions/incidents;
- an elaborate 2 (two) stage procedure for classification of a wilful defaulter has been provided under the Wilful Defaulter Directions. This 2 (two) stage procedure includes: (i) identification of the default and the wilful defaulter by the 'identification committee'. In this regard the duties of the identification committee have also been provided under the Wilful Defaulter Directions; and (ii) identification committee thereafter applies before the 'review committee', who will entertain written applications by the associates of the willful defaulter, prior to reaching a decision, in interest of natural justice;
- the Wilful Defaulter Directions provide for specific measures to be taken against wilful defaulters, including, initiation of criminal proceedings, publication of photographs, and bar on providing any additional credit facility to the wilful defaulter and to any entity such willful defaulter is associated with; and
- the Wilful Defaulter Directions provide for removal of names of wilful defaulters and large defaulters through credit information companies pursuant to voluntary settlement or involuntary resolution of the debt wherever the outstanding amount gets below the required threshold.
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