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ARTICLE · 17 OCTOBER 2023

RBI Proposes A Revamp On The Framework Applicable To Wilful Defaulters

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Last month, the Reserve Bank of India (the "RBI") released a draft Master Direction (the "Draft Direction") proposing revisions to the Master Circular released...

IndiaFinance and Banking
Akil Hirani
Akil Hirani
Mohit Bothra
Mohit Bothra
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Last month, the Reserve Bank of India (the “RBI”) released a draft Master Direction (the “Draft Direction”) proposing revisions to the Master Circular released in 2015 relating to wilful defaulters. The Draft Direction has broadened the definition of “wilful default” and expanded the scope for Regulated Entities (“REs”), now covering commercial banks and co-operative banks, to classify borrowers as “wilful defaulters.” The Draft Direction also mandates a review and finalization of the wilful default aspects of a case within six (6) months of an account being classified as a Non-Performing Asset (“NPA”).

Background

The RBI released a Master Circular relating to wilful defaulters in 2015. However, major issues arose in 2016 when the RBI issued directions, i.e., the RBI (Frauds Classification and Reporting by Commercial Banks and Select FIs) Directions, 2016 (the “FCRSF Directions”), under which borrowers (including promoter directors and whole-time

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