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RBI to make borrowing expensive for ‘wilful defaulters’

RBI defines a wilful defaulter as a borrower who is able but unwilling to pay.

New Delhi | Published: December 12, 2013 3:14 am

Reserve Bank of India governor Raghuram Rajan on Wednesday warned that borrowing costs could increase significantly for wilful defaulters in the future. The proposal is a part of a discussion paper that the central bank will unveil next week to recognise and resolve financial stress.

“For wilful defaulters,or the category that we call uncooperative defaulters,future borrowing will become more expensive,” Rajan said at the Delhi Economics Conclave- 2013.

Rajan also promised more reforms in the coming weeks to improve depth and liquidity for government securities as well as measures to strengthen the corporate debt market.

The RBI defines a wilful defaulter as a borrower who is able but unwilling to pay,or one that has diverted loan proceeds for uses other than their initially stated intention. Wilful defaulters can also refer to borrowers that overstate profits in order to obtain a loan.

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