What changed
RBI issued a master circular consolidating all existing instructions on wilful defaulters as of July 1, 2013. It unified definitions, reporting thresholds, and penal measures from earlier circulars into a single reference document for banks and financial institutions.
What it means for you
Banks now have a single source for wilful defaulter rules, reducing ambiguity. The circular reinforces strict reporting of defaults over ₹25 lakh, mandates committee review for classification, and pushes criminal action for defaults above ₹1 crore. Lenders must tighten end-use monitoring and ensure accurate director reporting.
What you must do
- Report all wilful default accounts with outstanding ₹25 lakh and above to RBI and credit information companies quarterly.
- Form a committee of senior officials (headed by ED) to identify and classify wilful defaults.
- File suits and consider criminal action for wilful defaults of ₹1 crore and above where fraud is detected.
- Ensure accurate reporting of Director Identification Numbers (DIN) and exclude independent/nominee directors unless complicit.
- Monitor end-use of funds and flag diversion or siphoning promptly.
Who it affects
All scheduled commercial banks (excluding RRBs and LABs), All India Notified Financial Institutions, Borrowers with non-performing accounts over ₹25 lakh, Auditors and internal audit teams
What is the threshold for reporting a wilful defaulter?
Banks must report all non-performing borrowal accounts with outstanding funded facilities (and non-funded facilities converted to funded) aggregating ₹25 lakh and above, identified as wilful default by a committee.
What actions are required for defaults over ₹1 crore?
Banks must examine filing suits and consider criminal action if cheating or fraud is detected. This applies to wilful defaults of ₹1 crore and above.
Are independent and nominee directors treated differently?
Yes, independent and nominee directors should not be reported as wilful defaulters unless there is evidence of their involvement or complicity in the default.