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RBI GUIDELINES ON WILLFUL DEFAULTERS

Lenders can take action against the guarantor without first exhausting remedies against the primary debtor in the event of a default. The guarantoru2019s liability is immediate, and non-compliance with the lenderu2019s demands may lead to their classification as a wilful defaulter, holding guarantors accountable for guaranteed loans.

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RBI GUIDELINES ON WILLFUL DEFAULTERS

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  1. PLUTUS IAS

  2. RBI Guidelines on Willful Defaulters GS3: Economy

  3. Proposed Amendments to RBI Guidelines on Willful Defaulters: • 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. Factors Contributing to High Defaults: • Poor Banking Practices. • Discretionary Authority of Banking Officials. • Influence from Powerful Industrial Groups. • Intense Competition Among Banks.

  6. Non-Performing Assets (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).

  7. Best UPSC Coaching in Delhi • 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 approved the content for further posting. • Being the best provider of the best UPSC coaching in Delhi, Plutus IAS has been consistently delivering optimum results and creating a new brigade of young policymakers and bureaucrats for the Government of India.

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