RBI defines 'wilful defaulter'

NEW DELHI NOV. 7. The Reserve Bank of India has defined the term `wilful defaulter' paving the way for banks to acquire assets of defaulting companies through the Securitisation Ordinance and reduce their non-performing assets faster, the Chairman of Indian Banks Association (IBA), Dalbir Singh, said today. Mr. Singh, who was addressing a PHDCCI organised Bankers-Borrowers meet, said "The Securitisation Ordinance gives the right to banks to acquire assets of wilful defaulters. There was a demand that the law should not be harsh for non-wilful defaulters, who should be distinguished from wilful defaulters. The term wilful defaulter has been defined by RBI now".

He elaborated that, according to RBI, "a wilful defaulter is one who has not used bank funds for the purpose for which it was taken and who has not repaid loans despite having adequate liquidity". Mr. Singh also sought to allay fears of non-wilful defaulters saying "bankers will never ever misutilise the Ordinance". At the same time, he warned corporates and asked them to be disciplined in repaying bank loans on time as the government was committed to make income recognition norms in line with international standards.

The international standards classify an asset as NPA if the company fails to pay interest within 90 days against the Indian norm of 180 days.

The Securitisation Ordinance would ensure that companies do not siphon off current assets and stocks after they default on bank loans, the IBA chief said, adding the legal system was slow and this was taken advantage by defaulting borrowers.

"I will not subscribe to the observation that we do not help borrowers by restructuring their loans. The last resort has been legal action. Even after compromise formula, some borrowers have not paid up. NPA is bad for the financial system and discipline should come from all," he said.

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