The Reserve Bank of India (RBI) has turned down banks’ plea for additional time to classify borrowers as wilful defaulters. Under the current guidelines, banks must now adhere strictly to the six-month timeline for identifying and categorizing such defaulters. This decision reflects the RBI's focus on accountability and financial discipline within the banking system. It aims to prevent delays in legal proceedings, which often lead to reduced asset recovery values. Additionally, the RBI seeks to curb tactics employed by some borrowers to delay classification. Therefore, hampering timely action by banks.
By rejecting this request, the RBI reinforces its commitment to protecting lenders’ interests and maintaining the health of the financial ecosystem. Banks are expected to promptly comply with the directive and strengthen their internal mechanisms for handling wilful defaulters.
