According to RBI, a wilful default is deemed to have occurred in any of the following circumstances:
(i) When there is a default in repayment obligations by the unit (company/individual) to the lender even when it has the capacity to honour the said obligations. There is a deliberate intention of not repaying the loan.
(ii) The funds are not utilised for the specific purpose for which finance was availed but have been diverted for other purposes.
(iii) When the assets bought by the lender's funds have been sold off without the knowledge of the bank/lender.
(iv) Further, in cases where a letter of guarantees furnished by group companies of wilfully defaulting units are not honoured when they are invoked by the lender, then such group companies are also considered to be wilful defaulter.
Costs of being wilful defaulter
(i) Being a wilful defaulter means that the individual or company can attract certain penal measures. According to RBI, penal measures are applicable to a defaulter with an outstanding balance of more than Rs. 25 lakh.
(ii) Banks also report the names of the director (s) who was/were associated with the company at the time the account was classified as defaulter. This helps to put other banks against such individuals.
(iii) The worst thing that can happen if one is labelled a wilful defaulter is it pretty much chokes off most credit channels since no additional lending facility is available from any bank.
(iv) Banks and institutions have the right to change the management of a wilfully defaulting company.
(i) When there is a default in repayment obligations by the unit (company/individual) to the lender even when it has the capacity to honour the said obligations. There is a deliberate intention of not repaying the loan.
(ii) The funds are not utilised for the specific purpose for which finance was availed but have been diverted for other purposes.
(iii) When the assets bought by the lender's funds have been sold off without the knowledge of the bank/lender.
(iv) Further, in cases where a letter of guarantees furnished by group companies of wilfully defaulting units are not honoured when they are invoked by the lender, then such group companies are also considered to be wilful defaulter.
Costs of being wilful defaulter
(i) Being a wilful defaulter means that the individual or company can attract certain penal measures. According to RBI, penal measures are applicable to a defaulter with an outstanding balance of more than Rs. 25 lakh.
(ii) Banks also report the names of the director (s) who was/were associated with the company at the time the account was classified as defaulter. This helps to put other banks against such individuals.
(iii) The worst thing that can happen if one is labelled a wilful defaulter is it pretty much chokes off most credit channels since no additional lending facility is available from any bank.
(iv) Banks and institutions have the right to change the management of a wilfully defaulting company.
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