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RBI expands definition of 'wilful default'

By : Ms. Bobby Anand on 26 June 2008 Print Print this Report Abuse
 


The Reserve Bank has expanded the definition of wilful defaulters by including Companies that try to dispose off mortgaged properties without the knowledge of the lenders. According to the revised definition, a wilful default will include “a unit which has defaulted in meeting its payments/repayment obligation to the lenders and has also disposed of or removed the movable fixed assets or immovable property given by it for the purpose of securing a term loan without the knowledge of the bank/lender," RBI said in a notification issued for the Urban Co-operative Banks (UCBs) on Tuesday. The RBI had issued a similar notification for commercial banks on May 29. This, addition to the existing definition, which follows a Supreme Court order, will come into force with immediate effect, the bank said. Under the existing definition, a wilful defaulter includes units that have not used the finance from the lender for the specific purpose for which it was availed, but have diverted it for other purposes. According to RBI, a company or an institution is said to make a wilful default if it has defaulted in meeting its payment or repayment obligations to the lender even when it has the capacity to honour the obligations. As per the RBI circular, no additional facility is to be provided to the listed wilful defaulters. It further said that entrepreneurs and Companies that are guilty of siphoning and diversion of funds should be debarred from institutional funds for at least five years. By Ms.Bobby Aanand, Metropolitan Jury.

Source : Financial Express, http://www.financialexpress.com/news/RBI-expands-definition-of-wilful-default/326961/

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