‘Banks can publish photo of wilful defaulters’https://indianexpress.com/article/business/banking-and-finance/ban-bad-loan-defaulters-picture-publish-rbi-3056912/

‘Banks can publish photo of wilful defaulters’

Asking the banks not to indiscriminately publish photographs of defaulters and guarantors in newspapers, the RBI directed the lending institutions to formulate a policy in this regard.

The Reserve Bank of India (RBI) has said banks can publish photographs of only those borrowers who have been declared wilful defaulters as per the central bank’s guidelines.

Asking the banks not to indiscriminately publish photographs of defaulters and guarantors in newspapers, the RBI directed the lending institutions to formulate a policy in this regard.

In a circular to the chairman and CEOs of banks, the RBI said a lending institution can consider publication of the photographs of only those borrowers, including proprietors/ partners /directors / guarantors of borrower firms/ companies, who have been declared as wilful defaulters following the mechanism set out in the RBI instructions referred to above. “This should not apply to the non-whole time directors who are exempted from being considered as wilful defaulters unless the special conditions, in accordance with these instructions, are satisfied,” the RBI said.

The RBI said the lending institutions should formulate a policy with the approval of their board of directors which clearly sets out the criteria based on which the decision to publish the photographs of wilful defaulters will be taken by them so that the approach is neither discriminatory nor inconsistent.

Advertising

The lending institutions should not publish photographs of any other defaulting borrowers, it said.

“It has been observed that some lending institutions have been publishing the photographs of defaulters/ guarantors in newspapers,” the RBI said. It said the direction is in view of the sensitivity involved and need to prevent the publishing of photographs of defaulting borrower/ guarantor in an indiscriminate manner.

As part of their strategy to ‘name and shame’ defaulters, banks, mostly public sector lenders, began publishing pictures of loan defaulters in newspapers and at other places around the areas of residence of such borrowers to force them to pay up. This exercise was later extended to the guarantors of loan defaulters as well as part of efforts to build pressure on the borrowers to clear their dues. However, several borrowers had protested against this practice to the RBI and the government.