How RBI Plans to Tackle Willful Defaulters of Loans

How RBI Plans to Tackle Willful Defaulters of Loans

How RBI Plans to Tackle Willful Defaulters of Loans

Willful defaulters are those borrowers who have the ability to repay their loans but choose not to do so. 

They pose a serious threat to the banking system and the public money. 

The Reserve Bank of India (RBI) has recently prepared a draft to curb the menace of willful defaulters and take strict action against them. 

Here are the key points of the draft and the implications for the borrowers.


What is the new draft by RBI? : 

The new draft by RBI is based on the feedback of loan giving companies and suggestions of various courts. 

It proposes to crack down on willful defaulters who take loans of more than Rs 25 lakh in various ways.

Some of the proposed rules are:

• Willful defaulters will have to settle their old NPA (non-performing asset) account before taking a new loan.

• Willful defaulters will not get the facility of restructuring of loan

• Willful defaulters will be tagged as such within 6 months of an account becoming NPA.

• Non-banking financial companies (NBFCs) will also be allowed to tag accounts as willful defaulters following these rules.

Why is RBI taking this step? : 

RBI is taking this step because the cases of willful non-repayment of loans have increased in recent years. 

A report said that by the end of December 2022, the intentional default loan amount had reached about Rs 3.4 lakh crore.

Such defaulters are nothing but criminals to the financial system, because they borrow and run away. 

They use legal loopholes and the power of money to avoid repaying the loan. 

They cause losses to the banks and the depositors who entrust their money to the banks.


What are the consequences of being a willful defaulter? : 

Once a person taking a bank loan is tagged as a willful defaulter, he or she will have to face many problems. 

Some of the consequences are:

• Willful defaulters will not get any additional loan from the bank or financial institution.

• Willful defaulters will face legal action and recovery proceedings from the banks and the courts.

• Willful defaulters will have a negative impact on their credit score and reputation.

• Willful defaulters will be barred from holding any directorship or management position in any company.

Conclusion : 

RBI has prepared a draft to curb the problem of willful defaulters of loans. 

The draft proposes to take strict action against such borrowers and prevent them from taking advantage of the banking system. 

The draft aims to protect the interests of the banks and the depositors and ensure the smooth functioning of the financial system.





Content Source Courtesy : 
https://www.businessleague.in/reserve-bank-of-india-now-the-countdown-of-those-who-do-not-repay-the-loan-starts-rbi-is-bringing-new-rule/?amp=1