The Reserve Bank of India (RBI) suggested on Thursday that lenders categorize a borrower as a “willful defaulter” within six months of his account being deemed a non-performing asset (NPA), earlier there was no time restriction. Borrowers were supposed to be recognized.

Norms are being revised. The central bank stated that the decision was made after examining Supreme Court and High Court judgments and decrees, as well as submissions and ideas from banks and other stakeholders.

Willful defaulters are people who have the ability to repay bank debts but fail to do so or reroute the funds. A significant defaulter is one who has an outstanding sum of Rs 21 crore or more and whose account is categorised as dubious or loss, whereas a willful defaulter is one who has deliberately defaulted and has defaulted. The sum is in excess of 125 lakhs.

“The lender will examine the ‘willful default’ aspect in all accounts having outstanding amounts of Rs 125 lakh and above, or as notified by RBI from time to time, and complete the process of classifying/declaring the borrower’s account as NPA. within six months of being classified as a willful defaulter,” the RBT draft norms propose.

It said that evidence of wilful default should be reviewed by a lender-created identification committee. The RBI further suggested that no new credit facility be given by any lender to a wilful defaulter or any company linked with a willful defaulter. The prohibition on new loan facilities will be in force for one year after the lender removes the wilful defaulter’s name from the list of willful defaulters (LWD).

Furthermore, a creditor shall not permit a willful defaulter or any entity with which a willful defaulter is associated to engage in new ventures within five (5) years of the willful defaulter’s name being disclosed. No credit facility will be extended by the lender for a period of 10 days from IWD.

Willful defaulters are not eligible for debt restructuring, according to the rules. The proposed standards declare that, When there is a default by the principal debtor in making payment or repayment, the creditor shall be able to proceed against the guarantor even without exhausting his remedies against the principal debtor.