Lenders cannot publish defaulters’ photographs randomly, says RBI

To prevent publishing of the photographs of defaulting borrowers/ guarantors in an indiscriminate manner, the Reserve Bank of India on Thursday said a lending institution can do so only in the case of those borrowers, who have been declared as wilful defaulters.

The central bank issued the directive “in view of the sensitivity involved and the need to prevent the publishing of photographs of defaulting borrower/ guarantor in an indiscriminate manner.”

The clause pertaining to publication of photographs will not apply to the non-whole time directors who are exempted from being considered as wilful defaulters unless the special conditions, in accordance with the instructions under the Master Circular on Wilful Defaulters, are satisfied.

The RBI said lending institutions have to formulate a policy, with the approval of their Board of Directors, which clearly sets out the criteria based on which the decision to publish the photographs of a person will be taken. This is to ensure that their approach is neither discriminatory nor inconsistent.

The central bank’s directive comes in the backdrop of some borrowers challenging banks on the legal validity of publication of their photographs in newspapers.

A ‘wilful default’ is deemed to have occurred when a unit has defaulted in meeting its payment / repayment obligations to the lender even when it has the capacity to honour the said obligations or has not utilised the finance from the lender for the specific purposes for which finance was availed of but has diverted the funds for other purposes.

Further, a wilful default occurs when a unit has defaulted in meeting its payment / repayment obligations to the lender and has siphoned off the funds or has disposed off or removed the movable fixed assets or immovable property given for the purpose of securing a term loan, without the knowledge of the bank / lender.

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