RBI/2004/220
DBOD.No. DL.BC.94/20.16.003/2003-04 June
17, 2004 All Scheduled Commercial Banks (excluding RRBs) and All Notified
All-India Financial Institutions Dear Sir Annual Policy Statement:
2004-05 - Wilful Defaulters – Clarification on Process At
present, in terms of our circular DBOD
No.BC.DL.7/20.16.003/ 2003-04 dated July 29, 2003, banks/financial institutions
(FIs) are required to – - form a Committee
of higher functionaries headed by the Executive Director for classification of
borrowal accounts as wilful defaulters, and
- create
a redressal mechanism in the form of Committee headed by Chairman and Managing
Director for giving a hearing to borrowers who represent that they have been wrongly
classified as wilful defaulters.
2. It
has been represented by the borrowers who have been classified as ‘wilful defaulters’
that redressal mechanism should precede the classification as ‘wilful defaulter’.
In this connection, please refer to paragraph 123 of the Annual
Policy Statement for the year 2004-05 enclosed to the Governor’s letter No.MPD.BC.249/07.01.279/
2003-04 dated May 18, 2004. Accordingly, it is clarified that the classification
of the defaulter as wilful and the mechanism for redressal of the grievance of
the borrower concerned are to be carried out thoroughly through two distinct processes,
viz. - The first stage would be the identification
of default as ‘wilful’ based on the prescribed norms (vide our circular DBOD
No.DL(W)BC.110/ 20.16.003/2001-02 dated May 30, 2002) through a Committee
approach as stipulated in paragraph 1(i) of the circular dated July 29, 2003 referred
to above.
- The borrower should thereafter be
suitably advised about the proposal to classify him as wilful defaulter along
with the reasons therefor. The concerned borrower should be provided reasonable
time (say 15 days) for making representation against such decision, if he so desires,
to the Committee headed by the Chairman and Managing Director.
3. A
final declaration as ‘wilful defaulter’ should be made after a view is taken by
the Committee on the representation and the borrower should be suitably advised. 4. The
above guidelines shall come into force with immediate effect. 5. Please
acknowledge receipt. Yours faithfully (C.
R. Muralidharan)
Chief General Manager-in-Charge
Wilful
Defaulters – Clarification on Process 123.
At present, banks/FIs are required to form a Committee of higher functionaries
headed by the Executive Director for classification of borrowal accounts as wilful
defaulters and create a redressal mechanism in the form of a Committee headed
by the Chairman & Managing Director for giving a hearing to borrowers who
have grievance on their classification as ‘wilful defaulters’. Representations
have been received that redressal of grievance after the event is not fair in
view of the damage to the reputation that cannot be easily reversed. The suggestion
was that an opportunity be provided to the defaulter to be heard before being
declared as such. It is, therefore, clarified that: The
classification of borrowal accounts and the redressal mechanism are two distinct
processes, comprising (i) identification of defaults as wilful with clear-cut
reasons; and (ii) providing an opportunity to the borrower to make a representation
before being classified as a wilful defaulter.
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