Lok Sabha Question No. 73 (UNSTARRED), answered on 2023-12-04
Subject: Wilful Defaulters
Ministry: FINANCE
Asked by: Aparupa  Poddar, P.R. Natarajan

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF FINACIAL SERVICES

## LOK SABHA UNSTARRED QUESTION NO-73

ANSWERED ON MONDAY, DECEMBER 4, 2023/AGRAHAYANA 13, 1945 (SAKA)

## WILFUL DEFAULTERS

## 73.  SHRIMATI APARUPA PODDAR SHRI NATARAJAN P.R.

Will the Minister of FINANCE be pleased to state:-

(a) the  reason  for  allowing  wilful  defaulters  to  enter  into  a  compromised  settlement  with  the banks;

(b) the number of wilful defaulters with amount (in Rs.) for last 5 years;

(c) the amount of losses the Scheduled Commercial Banks (SCBs) have faced due to haircuts and wilful defaulters;

(d) whether the Government intends to increase the cooling of period from 12 months and if so, the details thereof, if not, the reasons therefor;

(e) whether  the  Government/Reserve  Bank  of  India  are  not  going  for  confiscated  assets  and wealth through this process in the same manner as loan recovery is made from the ordinary people and MSMEs; and

- (f) if so, the reasons therefor?

## ANSWER

## THE MINISTER OF STATE IN THE MINISTRY OF FINANCE

## (DR. BHAGWAT KARAD)

(a)  to  (f):  As  per  inputs  received  from  the  Reserve  Bank  of  India  (RBI),  the  primary  regulatory objective  behind  allowing  wilful  defaulters  to  enter  into  compromise  settlement  is  to  enable multiple avenues to lenders to recover the money in default without much delay. Apart from the time  value  loss,  inordinate  delays  result  in  asset  value  deterioration  which  hampers  ultimate recoveries.  Compromise  settlement  is  recognised  as  a  valid  resolution  mechanism  under  RBI' s Prudential Framework on Resolution of Stressed Assets dated 7.6.2019. Further, the imperatives for  lenders  are  no  different  when  it  comes  to  recovery  from  borrowers  classified  as  wilful defaulter. Continuing such exposures on the balance sheets of the lenders without resolution due to  legal  proceedings  locks  lenders'  funds  in  an  unproductive  asset,  which  is  not  a  desirable position.  Further,  continuation  of  criminal  proceedings  underway  or  to  be  initiated  against  the borrowers classified as wilful defaulter ensures that perpetrators of any malafide action do not go scot-free. Further, compromise settlement is not available to borrowers as a matter of right; rather it  is  a  discretion  to  be  exercised  by  the  lenders  based  on  their  commercial  judgement.  Also, proposals  for  compromise  settlements  in  respect  of  debtors  classified  as  wilful  defaulter  are required to be approved by lenders' Board.

Scheduled  Commercial  Banks  (SCBs)  and  All  India  Financial  Institutions  report  certain  credit information of all borrowers having aggregate exposure of Rs. 5 crore and above to the Central Repository  of  Information  on  Large  Credits  (CRILC).  As  reported  in  CRILC  database,  as  on 31.3.2023,  total  2,623  unique  borrowers  were  classified  as  wilful  defaulters,  with  aggregate outstanding of Rs. 1,96,049 crore, by SCBs.

As  per  the  RBI's  Framework  for  Compromise  Settlements  and  Technical  Write -offs  dated 8.6.2023, the cooling period for farm credit exposures is to be determined by the Board-approved policy of lenders and a floor of 12 months of cooling period has been prescribed in respect of exposures other than farm credit exposures. However, lenders may stipulate higher cooling periods in terms of their Board approved policies.

Banks initiate/ continue with action initiated against wilful defaulters under the various recovery mechanisms available, such as filing of a suit in civil courts or in Debts Recovery Tribunals, action under  the  Securitisation  and  Reconstruction  of  Financial  Assets  and  Enforcement  of  Security Interest Act, 2002, filing of cases in the National Company Law Tribunal under the Insolvency and Bankruptcy  Code,  2016,  through  negotiated  settlement/compromise,  and  through  sale  of  nonperforming  assets.  Further,  as  per  the  RBI's  Framework  for  Compromise  Settlements  and Technical Write-offs dated 8.6.2023, compromise settlements are undertaken by lenders in respect of wilful defaulters without prejudice to the criminal proceedings underway against such debtors.

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