What changed
This master circular compiles all existing instructions on wilful defaulters issued up to July 2012 into a single document. It reaffirms the definition of wilful default, including deliberate non-payment, siphoning of funds, and asset misappropriation. It also reiterates reporting thresholds and penal measures.
What it means for you
Banks now have a unified reference for identifying and handling wilful defaulters, reducing ambiguity. The circular reinforces the need for strict monitoring of end-use of funds and internal audits. Lenders must ensure accurate reporting to credit information companies and consider criminal action for large defaults.
What you must do
- Review and update internal policies to align with the master circular's definition of wilful default.
- Ensure quarterly reporting of wilful defaults of ₹25 lakh and above to RBI and credit information companies.
- Form committees headed by an Executive Director to identify wilful defaults in non-performing accounts.
- Initiate legal or criminal proceedings for wilful defaults of ₹1 crore and above where fraud is detected.
- Verify accuracy of director details, including Director Identification Numbers, before reporting.
Who it affects
All scheduled commercial banks (excluding RRBs and LABs), All India Notified Financial Institutions, Borrowers and directors of defaulting entities, Credit information companies
What is the threshold for reporting wilful defaults?
Banks must report all non-performing borrowal accounts with outstanding funded facilities aggregating ₹25 lakh and above that are identified as wilful default by a committee of senior officials.
What actions are required for defaults over ₹1 crore?
Banks should examine all wilful defaults of ₹1 crore and above for filing suits and consider criminal action if cheating or fraud is detected.
Does this circular apply to overseas branches?
Yes, but reporting of wilful defaults at overseas branches is required only if such disclosure is permitted under the laws of the host country.