What Is Wilful Defaulters And Related Terms The Reserve Bank Of India On 7th Jan

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Defining “Wilful Defaulters” –
In order to precisely define the term “Wilful Defaulters” and the related terms the Reserve Bank of India on 7th Jan’15 updated his guidelines and defined Wilful Defaulters as –

a. Any unit which has not made payment/ repayment obligations to its lender even though unit has an adequate capacity to fulfil the mentioned obligations will be a wilful defaulter.
b. The unit has not utilised the finance for already defined project or specific purpose and has diverted the funds.
c. If any unit have not utilised funds for specific purposes for which finance was availed to it and siphoned off the allocated funds, the unit will be a wilful defaulter.
d. Even after siphoning off the funds, if the unit does not …show more content…

II. Unit – Wherever unit term is mentioned in the Wilful Defaulter, it is construed for individuals, juristic persons, all forms of business enterprises. Interestingly, whenever any business enterprises, other than companies are defined as unit, then banks/lenders/FI’s can report the names of the responsible or authorized persons holding the enterprise management office for the enterprises affairs.

III. Funds diversion – Any unit will be a wilful defaulter if it diverse allocated funds :
i. If the short-term working capitals funds have been utilized for long term purposes, without the conformity of the sanction. ii. Deployed for purposes other than those for which the loan was sanctioned. iii. Transferred to the other subsidiaries or group companies by any modality. iv. Routed through any other bank other than lender bank without any prior permission from the lender.
v. Invested in the other company or companies by way of acquiring equities or debt instruments without any prior permission from the lender. vi. Not accounted for any shortfall in deployment vis-a-vis the amounts disbursed or withdrawn.

IV. Siphoning of funds - With wilful defaulters, siphoning of funds is interpreted as the utilization of funds unrelated to the sanctioned tasks of the borrower from the lenders or banks or financial institutions. These will

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