Banks reject proposal by corporates to club 'fraud' A/Cs & 'wilful defaulters'

economictimes.indiatimes.com:

fraud' accounts with 'wilful defaulters'. Senior bankers, who had discussed the suggestion over the last few weeks, arrived at the decision while preparing a standard operating procedure (SOP) for dealing with borrowers before declaring an account as a fraudulent one. The suggestion, made by chambers of commerce to the Reserve Bank of India, was referred to the banking industry body by the regulator.

Borrowers, including a few bankers, felt that it could make sense to combine the two sets of accounts, which are often legally challenged and sometimes difficult to segregate due to overlaps in some of the definitions, under a single category. «But most are of the view that the two should be kept separate. One results in an FIR, the other may not always lead to proceedings under the criminal law.

While a fraudulent borrower in all probability is a wilful defaulter, every wilful defaulter may not technically be a fraud. Also, there may not be default in a fraud account,» a senior banker told ET. According to the draft SOP on fraud accounts, which was deliberated by bankers at a meeting on Monday, borrowers would be given the opportunity to respond and explain why the account should not be classified as a fraudulent account but there would be no personal or physical hearing.