What changed
RBI issued a master circular consolidating all previous circulars on wilful defaulters into one document. The circular formalizes the definition of wilful default, including deliberate non-payment, siphoning of funds, and asset misutilisation. It also prescribes penal measures, roles of auditors, and a grievance redressal mechanism.
What it means for you
Banks and FIs now have a single reference for all wilful defaulter guidelines, reducing ambiguity. The circular reinforces the need for strict monitoring of end-use of funds and accurate reporting to credit bureaus. Lenders must ensure their internal committees identify and report wilful defaults promptly to avoid regulatory action.
What you must do
- Update internal policies to align with the master circular's definition of wilful default and penal measures.
- Ensure all non-performing accounts with outstandings of Rs.25 lakh and above are reviewed by a committee for wilful default.
- Report confirmed wilful defaulters to RBI and CIBIL quarterly in the prescribed format.
- Strengthen end-use monitoring of funds and audit processes to detect diversion or siphoning early.
- Implement the grievance redressal mechanism for borrowers aggrieved by inclusion in the wilful defaulters list.
Who it affects
All scheduled commercial banks (excluding RRBs and LABs), All India Notified Financial Institutions, Borrowers with outstanding credit facilities of Rs.25 lakh and above
What is the threshold for reporting a wilful defaulter?
Banks and FIs must report all non-performing borrowal accounts with outstandings (funded and non-funded facilities converted to funded) aggregating Rs.25 lakh and above that are identified as wilful default by a committee of higher functionaries.
What actions can banks take against wilful defaulters?
Penal measures include filing criminal cases, debarring from accessing additional credit, and reporting to credit bureaus. Banks can also initiate criminal action under the JP Committee recommendations and monitor end-use of funds closely.
How can a borrower challenge inclusion in the wilful defaulters list?
The circular provides a grievance redressal mechanism where aggrieved borrowers can approach the bank's internal committee. If unsatisfied, they may escalate to the Banking Ombudsman or other appropriate forums as per existing RBI guidelines.