Key Points
Indian banks have been wary of declaring overdue loan accounts as fraud over lack of clarity following the Supreme Court's decision that made it mandatory for lenders to give borrowers a chance to represent themselves before declaring the account as fraud...
The issue was discussed in a meeting of bankers last month after the Reserve Bank of India sought views from lenders on a common mechanism for declaring accounts as "wilful default"...
"The RBI has sought comments from banks on legal and operational issues and the need for a common mechanism for identification of wilful defaulters," said one of the bank executives, adding that the central bank sought comments after it received representation from industry bodies on the issues faced by borrowers as a part of consortium lending...
"The RBI should come up with a clarification, in which case all lenders can follow a standard operating procedure," he said.. Earlier, lenders had represented to the Reserve Bank to defer its circular concerning the settlement of fraud or wilful default cases by at least six months...
After issuing the 'Framework for Compromise Settlements and Technical Write-off' circular on June 9, the banking regulator came out with an explainer, stating that the provision enabling banks to sign compromise settlements in respect of borrowers categorised as fraud or wilful defaulters was not a new regulatory instruction..
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