Banks seek RBI's clarification on fresh funding to wilful defaulters

Banks typically calculate the net present value (NPV) of the security and compare it with the settlement amount, which is mostly in cash

Banks have sought clarification from the Reserve Bank of India (RBI) on whether the latest guidelines on compromise settlement, which allows lenders to extend loans to defaulters after a cooling off following a compromise settlement, are also applicable to wilful defaulters and fraud accounts.

According to top banking industry sources, lenders need flexibility for compromise settlements with respect to issues like following debt-recast norms and staff accountability.

On June 8, the banking regulator issued norms on compromise settlement in which regulated entities were allowed to undertake compromise settlements or technical write-offs. This is in respect to accounts categorised as wilful