The RBI had recently expanded the definition of ‘wilful defaulters’ by including those companies which try to dispose of the mortgaged property without the knowledge of bank or the lenders. The RBI had earlier said no additional facility should be provided to the listed wilful defaulters and entrepreneurs. The regulator had said companies which are guilty of siphoning and diversion of funds should be debarred from institutional funds for five years.

The RBI circular issued this week said no account should be taken up for restructuring by the banks unless the financial viability is established and there is a reasonable certainty of repayment from the borrower, as per the terms of restructuring package. “Any restructuring done without looking into cash flows of the borrower and assessing the viability of the projects or activity financed by banks would be treated as an attempt at ever greening a weak credit facility and would invite supervisory concerns/action,” the RBI warned.

“Acquisition of equity shares, convertible bonds and convertible debentures in companies by way of conversion of debt or overdue interest can be done without seeking prior approval from RBI, even if by such acquisition the prudential capital market exposure limit prescribed by the RBI is breached,” it said.

What are they?

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

The earlier directive

The Reserve Bank had earlier said no additional facility should be provided to the listed wilful defaulters and entrepreneurs. The regulator had also said companies found to be guilty of siphoning and diversion of funds should be debarred from institutional funds for five years

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