Loan Re Payers Alert: Reserve Bank proposes that within 6 months of an account becoming NPA, it should be tagged as willful defaulter. Due to this, they will have to face many difficulties to take the loan again.
Willful Defaulters means those borrowers who, despite having the ability to repay the loan, do not return the loan taken from any bank or other financial institution. These people use this money somewhere else instead of repaying the loan. Now after the new proposal of RBI, there will be strict action against such people. In fact, it has been said in the new draft of RBI that strict action will be taken against willful defaulters taking loans of more than Rs 25 lakh in many ways.
Tag within 6 months of being NPA
According to the proposal given by the Central Bank, such willful defaulters will have to first settle their old NPA account to take a new loan. RBI proposes that an account should be tagged as willful defaulter within 6 months of it becoming NPA. Earlier, the Reserve Bank did not have any specific time limit for applying this label within which such borrowers should have been identified.
What will happen by tagging willful defaulters?
Once the tag of willful defaulter is imposed, then the borrowers will have to face many difficulties. According to the RBI proposal, a willful defaulter will not get any additional loan from any bank or financial institution. Not only this, if any unit is associated with a willful defaulter, then it will also not be able to get loan after the implementation of this proposal. Under this proposal, willful defaulters will not even get the facility of loan restructuring. It has been said in the draft of RBI that NBFCs should also be allowed to tag accounts as willful defaulters by following the same rules.
Defaulter will get a chance to be heard!
RBI has suggested in its proposal that banks should constitute a review committee and give the borrower up to 15 days to give written representation. Besides, the borrower should also get a chance for personal hearing if needed. RBI also said that before granting approval for transfer of loan or restructuring, it will be mandatory to complete investigation of any default account for giving or removing the label of ‘willful default’.
Suggestions have been sought till 31 October
It has been said in the RBI circular that the purpose of these instructions is to establish a system for releasing loan related information about those who willfully default on loans, so that the lending institutions will be able to decide not to give further loans. RBI has sought suggestions from all stakeholders on these draft rules by October 31 through email ([email protected]).