RBI tightens norms for labeling of 'willful defaulters'

The Reserve Bank of India has tightened the rules banks have to follow when declaring any borrower a "wilful defaulter".

Banks will now have to refer each case of a wilful default to a review committee which will take the final call on the matter. The review committee, as directed by RBI, is to be headed by an executive director and consist of two other senior officers of the rank of general manager or deputy general manager.

If the committee finds the borrower guilty of a wilful default, it will have to issue a showcause notice to the concerned borrower and promoter and call for their submissions.

Also, the central bank has very clearly said that there is no escape for the promoter of the defaulting company, even if he is not a whole time director.