RBI: Now, bank boards must settle with wilful defaulters

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MUMBAI: The Reserve Bank of India (RBI) has introduced a new regulation aimed at increasing caution among leaders when declaring borrowers as wilful defaulters or frauds. The move comes as part of the RBI’s ongoing efforts to enhance transparency and accountability in the banking sector.

Under the new framework, bank boards will now be required to settle with wilful defaulters before categorizing them as such. This means that before declaring a borrower as a wilful defaulter or fraud, the bank board must first attempt to reach a settlement with the borrower. This process aims to encourage banks to explore all possible avenues of resolution before taking punitive action.

The RBI’s decision to reframe the article of the wilful defaulters’ classification comes as a response to concerns raised by various stakeholders. Critics argue that labeling borrowers as wilful defaulters without exhausting all possible means of resolution may have negative consequences, such as damaging the borrower’s reputation and hindering future credit availability.

By introducing this new requirement, the RBI aims to strike a balance between holding defaulters accountable and ensuring fairness in the process. The measure emphasizes the importance of settling disputes through negotiations and alternative dispute resolution mechanisms, rather than solely relying on punitive measures.

It is important to note that this information is based on the knowledge available up until September 2021, and there may have been further developments or revisions to the RBI’s policies since then. To obtain the most accurate and up-to-date information, it is recommended to refer to official announcements from the RBI or reliable news sources.

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