To tighten grip on errant borrowers, the Reserve Bank of India (RBI) has come up with a set of revised guidelines on how lenders should deal with ‘non-cooperative’ borrowers.
The RBI has modified the definition of a non-cooperative borrower as someone who “deliberately stone-walls legitimate efforts of the lenders to recover their dues… thwarting lenders’ efforts for recovery of their dues by not providing necessary information sought, denying access to assets financed/collateral securities, obstructing sale of securities, etc…”.
The banks have been asked to set aside higher provisions for incremental lending to ‘non-cooperative’ borrowers. Provisions for any new loans sanctioned to the new category of borrowers could rise from as low as 0.40% of the loan value currently to as high as 25%.
Non-cooperative borrowers are separate from those classified as willful defaulters, a category first introduced under RBI guidelines in July 2012. A wilful defaulter is one who not only does not pay back bank loans, but also siphons off funds advanced by banks to put them to other uses. Borrowers who dispose of pledged property or moveable assets without the knowledge of creditors are also classified as wilful defaulters.