a proposal to recast its debt. According to RBI’s latest circular, once a company is declared a wilful defaulter, it loses access to finance from banks and other financial institutions. Further, promoters of such companies cannot be given fresh funds for five years to start a new venture. Lenders can also initiate criminal proceedings, if necessary, against the guarantors and companies or seek a change in management.
A borrower who fails to repay a loan, despite having the capacity to do so or diverts and siphons off money can be declared a wilful defaulter. Bankers say a borrower is declared a wilful defaulter only after many rounds of consultations and after he has been given adequate time to explain his position. The bank submits the details of wilful defaulters to the RBI every three months.