Borrowers who have the ability to pay but still default and thwart lenders' efforts for recovery of their dues by hiding information would now be termed as non-cooperative borrowers.
In its ongoing efforts to ring-fence the banking system from promoters who try to loot the banks and being careless about the way they run their business, the Reserve Bank of India (RBI) has asked banks to stay away from such borrowers, and keep aside more money as security cover if at all lend to them.
The central bank and the government are also working towards giving more teeth to the debt recovery tribunals.
A non-cooperative label will be attached if the defaulting borrower, which has borrowed amount above Rs 5 crore, fails to provide necessary information, deny access to assets financed and collateral securities obstructing sale of securities. RBI said in a release, "In effect a non-cooperative borrower is a defaulter who deliberately stone walls legitimate efforts of the lender to recover their dues."
Deep Mukherjee, senior director at India Ratings, said, "While RBI's efforts at cleaning up the system should be lauded, they should avoid creating moral hazards for banks in the process for their recovery. There are classifications such as wilful default and now non-cooperative borrower, making it difficult for banks to distinguish. Anyone who defaults should be brought to book as banks deal with tax payers' money and not running charitable institutions."
As a first step, the bank should issue a show-cause notice to the concerned borrower (and the promoter/whole-time directors in case of companies) and call for his submission, and after considering his submission issue an order recording the borrower to be non-cooperative and the reasons for the same. An opportunity should be given to the borrower for a personal hearing if the committee feels such an opportunity is necessary, according to the RBI.
The central bank in a release said, "A non-cooperative borrower is one who does not engage constructively with his lender by defaulting in timely repayment of dues while having the ability to pay."
The cut-off limit for classifying borrowers as non-cooperative would be those borrowers having aggregate fund-based and non-fund based facilities of Rs 5 crore from the concerned bank or financial institution. A non-cooperative borrower in case of a company will include, besides the company, its promoters and directors (excluding independent directors and directors nominated by the government and the lending institutions). In case of business enterprises (other than companies), non-cooperative borrowers would include persons who are in charge and responsible for the management of the affairs of the enterprise.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}