SBI rolls out policy on wilful defaulters

State Bank of India (SBI) has put together a comprehensive policy on wilful defaulters, which envisages setting up three wilful default identification committees (WDICs).

Each of these committees will be headed by a Deputy Managing Director (DMD). There will be quarterly reviews by branches for identification, declaration of wilful defaulters, and taking action against them.

As per the policy, proposals for classification of borrowers as wilful defaulters have to be placed before any of the three WDICs based on the area of operation – WDIC-I (south), WDIC-II (north), and WDIC-III (central).

Besides the DMD, each committee will have eight General Managers as members. The committees will be supported by a secretariat, which will submit the proposals received from the branches for the identification of wilful defaulters to them. According to the guidelines of the Reserve Bank of India (RBI), a wilful default is deemed to have occurred if a unit has defaulted in meeting its payment / repayment obligations to the lender even when it has the capacity to honour the said obligations; and has not utilised the finance from the lender for the specific purpose for which the finance was availed but has diverted the funds for other uses.

Further, instances of wilful default include a unit siphoning off the funds that have not been utilised for the specific purpose for which it was availed, nor are the funds available with the unit in the form of other assets; and has disposed 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.

India’s largest bank said it will declare borrowers with outstanding of ₹25 lakh and above as wilful defaulters in terms of the RBI guidelines.

Review of declaration

SBI said if the WDIC identifies a borrower, promoter/director, and the firm as wilful defaulter, the order will be sent to the review committee – comprising a Managing Director and any two independent directors – for review. The order will become final only after it is reviewed/confirmed by the review committee.

Once declared a wilful defaulter, a borrower/guarantor will remain in that category till the closure of the loan, irrespective of the outstanding in the account. SBI wants all branches/operating units, and respective controllers to conduct quarterly reviews of all non-performing asset (NPA) accounts maintained with them (outstanding above ₹25 lakh), and maintain an exhaustive and duly approved list of all such reviewed accounts.

This quarterly review for identification of instances of wilful default will ensure that no NPA accounts are left unexamined.

Publishing of photographs

SBI’s branches will consider publishing photographs of only those borrowers, including proprietors/partners/directors/guarantors of borrower firms/companies, who have been declared wilful defaulters, strictly following the mechanism for identification and declaration of wilful defaulters, and if the total outstanding in the accounts is ₹3 crore and above.

As per the policy, in respect of education loans, under no circumstances will the photographs be published. Branches may also consider excluding borrowers who are continuously engaging with the bank for settlement of dues.

The bank’s comprehensive policy on wilful defaulters is aimed at putting in place a system to disseminate credit information pertaining to wilful defaulters to caution other lenders to ensure that further finance is not made available to them.

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