The Reserve Bank of India (RBI) has put forth several amendments to its guidelines concerning the classification of “wilful defaulters” and the actions that should be taken against them : Immediate Classification: Lenders are now required to categorize a borrower as a “wilful defaulter” promptly within six months of their account being designated as a non-performing asset (NPA). This represents a significant change as there was previously no specific timeframe for identifying such borrowers, ensuring a more timely assessment of wilful default. Defining Wilful Default: The RBI defines wilful defaulters as borrowers or guarantors who have the financial capacity to repay the bank’s dues but choose not to do so or divert bank funds. The minimum outstanding amount for a wilful defaulter is set at Rs 25 lakh and above, providing a clear definition of who falls into this category.

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2. RBI Guidelines on Willful Defaulters
GS3: Economy

3. ProposedAmendmentstoRBIGuidelinesonWillfulDefaulters:
• Timely Classification: Borrowers must be classified as willful defaulters within six
months of their account becoming a non-performing asset (NPA).
• Definition of Willful Default: A willful defaulter is someone with the capacity to repay
but intentionally chooses not to or diverts funds. The minimum outstanding amount is
set at Rs 25 lakh.
• Identification Committee: Lenders establish an Identification Committee to assess
evidence of willful default objectively.
• Publication of Photographs: Lenders can publish photographs of willful defaulters, but
policies must be non-discriminatory and board-approved.
• Credit Facility Restrictions: No additional credit can be extended to willful defaulters or
related entities for one year after removal from the List of Willful Defaulters (LWD).
• New Ventures Restriction: Willful defaulters are prohibited from obtaining credit
facilities for new ventures for five years after removal from LWD.

4. • Restructuring Limitation: Willful defaulters cannot restructure their existing debt.
• Guarantor Liability: Lenders can take action against guarantors without exhausting
remedies against the primary debtor.
• Compromise Settlement: Removal from the LWD is only possible after full repayment of
compromised amounts.
• Credit Facility Transfer: Investigation into willful default scenarios is required before
transferring credit facilities.

5. • Poor Banking Practices.
• Discretionary Authority of Banking Officials.
• Influence from Powerful Industrial Groups.
• Intense Competition Among Banks.
FactorsContributingtoHighDefaults:

6. Non-PerformingAssets (NPAs):
• Definition: NPAs are loans with overdue principal or interest
payments, exceeding 90 days.
• Asset Status: Loans become NPAs when they stop generating
interest income for banks.
• RBI's Criteria: NPAs are assets that no longer contribute to a
bank's income.
• Classification: NPAs are categorized as Substandard Assets (up to
12 months), Doubtful Assets (12+ months), and Loss Assets
(uncollectible).

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• The mentioned article highlights the aspects of RBI guidelines
on willful defaulters. It also focuses on components for a
greater number of defaults. The talented writer has written
this current affairs news on the Economy Topic after profound
research. Moreover, our esteemed faculty Prateek Tripathi has
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