If a wilful defaulter has the will to rectify the default, he will be able to come out of the bad debt books of banks. Banking regulator Reserve Bank of India (RBI) has proposed that loans extended to wilful defaulters can be restructured if the latter is willing to “rectify the wilful default”.

“Banks may review the reasons for classification of the borrowers as wilful defaulters — specially in old cases where the manner of classification of a borrower as a wilful defaulter was not transparent — and satisfy itself that the borrower is in a position to rectify the wilful default,” the RBI said in its circular on ‘Prudential guidelines on restructuring of advances by banks’ issued this week. However, the borrowers indulging in frauds and malfeasance will continue to remain ineligible for restructuring.

A wilful defaulter is a borrower who has defaulted in meeting his payment/repayment obligations to the lender even when he has the capacity to honour the said obligations. As per data collected by Credit Information Bureau of India Ltd (CIBIL), as on March 31, 2008, there were 2,681 accounts (Rs 25 lakh and above) involving Rs 10,433 crore of wilful defaults by borrowers against whom banks have filed suits in various courts.

“The restructuring of such cases may be done with the board’s approval, while for such accounts, the restructuring under the CDR mechanism may be carried out with the approval of the Core Group only,” it said. Normally when a loan is restructured, the borrower gets interest waiver, moratorium on repayments and changes in the tenure and interest rates.

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