RBI expands definition of wilful defaulters

RBI expands definition of wilful defaulters
PTI
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First Published: Thu, May 29 2008. 02 01 AM IST
Updated: Thu, May 29 2008. 02 01 AM IST
New Delhi: The Reserve Bank of India (RBI) has expanded the definition of ‘wilful defaulters’ by including companies that try to dispose of mortgaged properties without the knowledge of the lenders.
According to the revised definition, a wilful default will include a “unit which has defaulted in meeting its payments/repayment obligation to the lenders and has also disposed of or removed the movable fixed assets or immovable property given by it for the purpose of securing a term loan without the knowledge of the bank/lender,” RBI said in a notification. This addition to the existing definition, which follows a Supreme Court order, will come into force with immediate effect.
Under the existing definition, a wilful defaulter includes units that have not used the finance from the lender for the specific purpose for which it was availed, but have diverted it for other purposes.
According to RBI, a company or an institution is said to make a ‘wilful default’ if it has defaulted in meeting its payment/repayment obligations to the lender even when it has the capacity to honour the obligations.
As per the RBI circular, no additional facility is to be provided to the listed wilful defaulters.
It further said that entrepreneurs and companies that are guilty of siphoning and diversion of funds should be debarred from institutional funds for five years.
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First Published: Thu, May 29 2008. 02 01 AM IST
More Topics: RBI | Defaulter | Loan | Mortgage | Supreme Court |