In cases where guarantees furnished by the companies within the group on behalf of the wilfully defaulting units are not honoured then such group companies should also be reckoned as wilful defaulters, says RBI in a clarification
The Reserve Bank of India (RBI) on Tuesday issued clarification on its guidelines on wilful defaulters. Accordingly, it said, banks can name company management as wilful defaulters. Similarly, group companies of a defaulting company can also be termed as wilful defaulters, the central bank said.
"While dealing with wilful default of a single borrowing company in a group, the banks and financial institutes (FIs) should consider the track record of the individual company, with reference to its repayment performance to its lenders. However, in cases where guarantees furnished by the companies within the group on behalf of the wilfully defaulting units are not honoured when invoked by the banks/ FIs, such group companies should also be reckoned as wilful defaulters,” RBI said in its clarification.
According to the new clarification, guarantors who refuse to pay will also be treated as defaulters. RBI said, "when a default is made in making repayment by the principal debtor, the banker will be able to proceed against the guarantor/surety even without exhausting the remedies against the principal debtor. case the said guarantor refuses to comply with the demand made by the creditor/banker, despite having sufficient means to make payment of the dues, such guarantor would also be treated as a wilful defaulter."
The central bank, however clarified that these norms would be applicable only prospectively. "It is clarified that this would apply only prospectively and not to cases where guarantees were taken prior to this circular. Banks/FIs may ensure that this position is made known to all prospective guarantors at the time of accepting guarantees," RBI added.
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