Reserve Bank defines ‘wilful defaulter’

“There was a demand that the law should not be harsh for non-wilful defaulters, who should be distinguished from wilful defaulters. The term willful defaulter has been defined by RBI now,” Indian Banks Association (IBA) and Central Bank of India chairman Dalbir Singh said at a bankers-borrowers meet at the PHD Chamber here on Thursday.

RBI had constituted two working groups to come up with the detailed guidelines of securitisation of assets and for asset reconstruction companies. Singh dismissed fears of misuse of the legislation, but urged industry to observe discipline in repaying bank loans in time. He said the government was committed to make income recognition norms in line with the international standards.

The international standards classify an account as a non-performing asset (NPA) if the company failed to pay interest within 90 days against the Indian norm of 180 days.

The ordinance would ensure that the companies do not siphon off current assets and stocks after they default on bank loans, he added.

On rate cuts, Singh said the Indian economy could not be compared to that of the US, where rates have been reduced to 1.25 per cent. “Prime lending rates of banks have come down to 11 per cent now from 16-17 per cent in 1996,” he said.

IBA vice-chairman and Canara Bank chairman RV Shastri said banks would soon start a system of rating borrowers. Lending rates would be fixed according to the ratings. Punjab National Bank chairman S. S. Kohli said banks’ performance had been influenced by the ongoing reforms. “We have never thought of VRS but after it was introduced 1,25,000 employees opted for it. Some banks are talking about a second round of VRS,” he added.