Wilful default: RBI to tweak rules to give lenders flexibility in handling cases

livemint.com:

RBI) is considering the change on the suggestions of banks, which believe that chances of making recoveries are higher if a dialogue is started at an early stage, the people cited above said on the condition of anonymity. The wilful defaulter tag shuts out borrowers from the formal banking sector. Finance ministry officials who met some of India’s top bankers recently also favour such flexibility, rather than sending all such accounts into a protracted legal process, the people cited above said.

The changes may figure in RBI’s final guidelines on Wilful Defaulters Framework for Compromise Settlement and Technical Write-offs expected in January. In September, the central bank had issued a draft paper on wilful default, proposing to refine the identification process and complete the entire process within six months after an account is classified as a non-performing asset (NPA). As per existing guidelines, banks can tag an account as NPA if the default continues for 90 days.

According to the persons cited above, while flexibility is expected in dealing with stressed accounts, the apex bank may stick to the current six-month period for declaration of wilful defaulters from the time an account gets classified as NPA. The central bank wants firm and quick action on such accounts, and does not favour the idea given by banks to extend this period to one year, the people said. Queries sent to spokespersons of RBI and the finance ministry remained unanswered.