Recently Right to Information activist Saket Gokhale filed an application with the central bank seeking the details pertaining to the top 50 ‘Wilful defaulters’ and their current loan status as of 16 Feb 2020. On 24th April he received a reply from RBI in which it was mentioned that Banks have written off loans worth up to Rs 68,000 crore as of September 30, 2019.
Some of the names which Feature on top of the ‘wilful defaulters’ list is the scam-hit Gitanjali Gems Limited, which is owned by fugitive diamantaire Mehul Choksi. The second and third spots are taken by FMCG company REI Agro Limited and Jatin Mehta’s Winsome Diamonds and Jewellery Limited respectively.
The term to be noticed here is Wilful Defaulter. Who are termed as wilful defaulter and how? We will learn everything in depth related to this topic in this article.
The RBI responded to my RTI with a list of willful defaulters (and the amount owed) as of 30th Sep, 2019.
— Saket Gokhale (@SaketGokhale) April 27, 2020
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Who is Wilful Defaulter?
As per the central bank, a company is classified as a ‘wilful defaulter’, if it has not met repayment obligations despite having the capacity to do so. All information related to this is available under the Central Repository of Information on Large Credits (CRILC), a central repository or database where the RBI stores credit information on all borrowers having aggregate fund-based and non-fund based exposure of Rs 5 crores and above.
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Guidelines Given By RBI to Categorize Wilful Defaulters
As per the central bank, a ‘wilful default’ would be deemed to have occurred if any of the following events is noted:
The unit or the company or the person has defaulted in meeting its payment / repayment obligations to the lender even when it has the capacity to honor the said obligations.
The unit or the company or the person has defaulted in meeting its payment / repayment obligations to the lender and has not utilized the finance from the lender for the specific purposes for which finance was availed of but has diverted the funds for other purposes.
The unit or the company or the person has defaulted in meeting its payment / repayment obligations to the bank and has siphoned off the all the funds so that the funds have not been utilized for the specific purpose for which it had availed the finance , nor are the funds available with the unit in the form of other assets.
The unit or the company or the person has defaulted in meeting of its payment / repayment obligations to the bank and has also disposed off or removed the movable fixed assets or immovable collateral given for the purpose of securing a term loan without the knowledge of the bank / lender.
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Repercussions Faced by Wilful defaulters
As per the central bank, a person/ company has to face certain repercussions if they are labeled as wilful defaulter by their lender. Some of the repercussions are given below:
No bank / FI will provide additional facilities to the listed wilful defaulters. Further, such companies (including their entrepreneurs / promoters)/Person where banks / FIs have identified siphoning / diversion of funds, misrepresentation of any sort, falsification of accounts and any attempt of fraudulent transactions should be debarred from institutional finance from the scheduled commercial banks, Financial Institutions, NBFCs, for floating any sort of new ventures for a period of 5 years from the date of removal of their name from the list of wilful defaulters as published/disseminated by RBI/CICs.
The legal process would be initiated against the borrowers / guarantors and foreclosure for recovery of dues. The bank may also initiate criminal proceedings against wilful defaulters, wherever necessary and deemed suitable.
The banks and FIs should adopt a proactive approach for a change of management of the wilfully defaulting borrower unit, Wherever possible,