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Lenders again move RBI on wilful defaulter tag for non-performing accounts

Dec 5, 2023

Banks have again approached the Reserve Bank of India (RBI) to request an extension in the deadline for classifying non-performing accounts as wilful defaulters, according to sources familiar with the matter. In September, the RBI had initially given banks six months to comply with the draft rules titled 'Framework for Compromise Settlement and Technical Write-offs' regarding the treatment of wilful and large defaulters.

Banks have again reached out to the Reserve Bank of India (RBI), seeking more time to declare a non-performing account as a wilful defaulter, said people with knowledge of the development.

In September, the RBI had granted banks six months in its draft rules 'Framework for Compromise Settlement and Technical Write-offs' on the treatment of wilful and large defaulters. However, banks want at least 12 months to complete the process.

Banks have sought more time after the regulator rejected their earlier request in October to defer the implementation of the guidelines by six months. Lenders made fresh representations last month, ahead of the final guidelines expected to be released by the end of December, said the people cited earlier.

"We have made a representation through the Indian Banks' Association to the RBI, requesting an extension of the timelines for completing the process of declaration of wilful default within one year of the account being classified as non-performing," said a bank executive aware of the matter.

Bankers have argued that six months may not be enough to complete the process, as they are now required to give borrowers an "in-person" hearing before classifying an account as a wilful default.

ET's queries emailed to the RBI remained unanswered till press time. ET had earlier reported that banks made a case for giving defaulting borrowers an "in-person hearing" at the time they identify an account as stressed rather than at the last stage before classifying the borrower as a wilful defaulter.

"We expect the regulator to consider our views and make favourable amendments to the draft regulations," said the executive.

[The Economic Times]

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