RBI modifies definition of non-cooperative borrower

Tightening its noose on loan defaulters, RBI today asked banks to refuse fresh funds to those thwarting recovery attempts despite having ability to pay and classify them as 'non-cooperative borrowers' for the entire sector.
Similar curbs will apply to the promoters and directors of such companies.
The new classification is different from the 'wilful defaulter' tag that banks attach to certain class of errant borrowers and the latest move comes at a time when the regulators are tightening their noose against widespread loan defaults inclduing by the corporates.
"In effect, a non-cooperative borrower is a defaulter who deliberately stone walls legitimate efforts of the lenders to recover their dues," the Reserve Bank said in a notification while modifying the definition of non-cooperative borrower.

It will also include those not engaging constructively with lender, do not provide necessary information sought, deny access to assets financed/collateral securities and obstruct sale of securities, the notification said.
The modification in definition would help banks to nail those who promote a sick company but have large personal wealth.

After many legal hassles, few banks, including United Bank of India, declared beleaguered Kingfisher Airlines as wilful defaulter as it was found out that the company and its directors were intentionally not paying dues.
Banks had given loans of about Rs 7,000 crore to now grounded airline.
Besides, banks are in the process of declaring jewellery exporter Winsome Diamonds as a 'wilful defaluter' as the company allegedly diverted loans.

RBI further said borrowers with aggregate fund-based and non-fund based loans (like bank guarantee and letter of credit) of Rs 5 crore can be classified as non-cooperative in such instances.
A non-cooperative borrower in case of a company will include, besides the company, its promoters and directors (excluding independent directors and directors nominated by the government and the lending institutions), it said.
For business enterprises (other than companies), non-cooperative borrowers would include persons in charge and responsible for management of the business.
The new criterion for non-cooperative borrowers will replace the one released earlier in February.
Banks or financial institutions (FIs) will be required to report information on their non-cooperative borrowers to Central Repository of Information on Large Credits (CRILC) set up by the RBI so as to collect, store, and disseminate credit data to lenders.