What changed
RBI issued a Master Circular consolidating all prior circulars on wilful defaulters into one document for easier reference. It reaffirms the definition of wilful default, including deliberate non-payment, siphoning of funds, and asset misutilisation. The circular also reiterates reporting requirements for defaults of Rs 25 lakh and above and penal measures for defaults of Rs 1 crore and above.
What it means for you
Banks and FIs must now refer to this single Master Circular for all guidelines on wilful defaulters, ensuring consistency in identification and reporting. The circular strengthens the system to blacklist wilful defaulters, restricting their access to further credit. Lenders need to be more vigilant in monitoring end-use of funds and reporting defaults promptly to RBI and CIBIL.
What you must do
- Review and implement the consolidated definition of wilful default as per the Master Circular.
- Ensure all wilful default cases with outstanding of Rs 25 lakh and above are reported quarterly to RBI.
- Examine cases of Rs 1 crore and above for filing suits and consider criminal action where fraud is detected.
- Update internal audit and inspection processes to identify diversion or siphoning of funds early.
- Report wilful defaults in consortium lending to all participating banks and FIs.
Who it affects
All scheduled commercial banks (excluding RRBs and LABs), All India Notified Financial Institutions, Borrowers and directors identified as wilful defaulters, Auditors and internal audit teams of banks and FIs
What is the threshold for reporting a wilful defaulter to RBI?
Banks must report all non-performing borrowal accounts with outstandings (funded facilities and such non-funded facilities which are converted into funded facilities) aggregating Rs 25 lakh and above that are identified as wilful default by a committee of higher functionaries.