The directions have been issued under Reserve Bank of India Act, 1934, Banking Regulation Act, 1949 and Credit Information Companies (Regulation) Act, 2005.

• The objective of direction is to provide for a non-discriminatory and transparent procedure for classifying a borrower as a wilful defaulter by the lenders.
  • As of March 2023, 16,883 accounts involving total borrowing of Rs 3.5 lakh crore had been classified as wilful defaulters. 

Key Provisions of the Direction

• Wilful Defaulter: wilful default with outstanding amount of ₹25 lakh and above
  • Wilful default occurs when borrower defaults in meeting payment/ repayment obligations to the lender and any one or more features are noticed
    • borrower has the capacity to pay
    • diversion of funds and siphoned off the funds, 
    • disposal of immovable or movable assets provided for securing credit or 
    • failure to infuse equity despite having the ability to do so.
• Large defaulter: default with an outstanding amount of ₹1 crore and above, and where suit has been filed  or whose account has been classified as doubtful or loss.
• Identification: Lenders have to establish Identification Committee to examine the evidence of wilful default.