RBI wants Sebi to bar ‘wilful’ defaulters from capital mkts

New Delhi :   Tightening the regulatory noose around wilful defaulters of bank loans, RBI has suggested to watchdog Securities and Exchange Board of India that such entities should be prevented from raising funds through capital markets.

To facilitate such restrictions on entities found to have ‘wilfully’ defaulted on bank loans, the Reserve Bank is exploring ways to share details of these defaulters with Sebi on a real time basis, sources told PTI.

The matter is yet to be discussed by Sebi internally and a final decision can be taken only after taking into account the provisions in various sets of existing regulations and the views of all stakeholders, a senior official said.

Currently, the information about wilful defaulters of bank loans are shared with Sebi and others, including credit information agencies like Credit Information Bureau (India) Ltd (CIBIL), on a quarterly basis.

To prevent defaulters from accessing other funds, while not honouring the claims of their existing lenders, RBI also wants CIBIL and other credit information agencies to get the names and other details of such entities on a real-time basis, or as soon as an entity is declared as ‘wilful defaulter’ by any of the banks.

The proposal comes against the backdrop of spiralling bad loans in the banking system, especially fuelled by increasing number of wilful defaulters.

Sharing details on real time basis can better equip Sebi and other agencies to ensure that wilful defaulters identified by banks do not have an opening to raise further funds from gullible investors through the securities market.

Going by estimates, the amount of non-performing assets (NPAs) in the system is worth about Rs 2 lakh crore. Both RBI as well as the government have raised concerns about high levels of bad loans especially at a time when economic growth has been below 5% in the last two financial years.

Generally, a ‘wilful default’ refers to failing to pay back the loan despite the entity having capacity to honour the said obligations.

Banks have been advised to examine all cases of wilful defaults of Rs 1 crore and above for filing of suits as well as consider criminal action wherever instances of cheating/fraud by the defaulting borrowers have been detected, according to RBI. The gross NPAs or bad loans of the domestic banking system were at 4.4 per cent of gross advances.

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