Compromise Settlements News Today

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Indian banks have refrained from declaring overdue loan accounts as fraud as the Supreme Courts decisions make it obligatory for lenders to provide borrowers an opportunity to represent themselves before naming accounts as fraud. The lenders have made provisions instead of declaring accounts as wilful defaults. The RBI has sought comments from banks on legal and operational issues on the common detection mechanism of wilful defaulters.

These wilful defaulters include fugitive Mehul Choksi’s Gitanjali Gems Limited, Rishi Agarwal’s ABG Shipyard Limited, REI Agro Limited, and Era Infra Engineering Limited. 

Bankers are wary of their decisions being questioned by vigilance and investigation agencies later, and want some assurance from the regulator before implementation of the circular. Lenders have held discussions with all stakeholders, including the government, soon after the circular was published, and want additional clarity before provisions are implemented.

The RBI has asked lenders to put in place board-approved policies for undertaking compromise settlements with the borrowers as well as for technical write-offs. The rules formalised by the board will also specify proposals for compromise settlements in respect of debtors classified as fraud or wilful defaulter.

When it comes to bank loan defaults, the Reserve Bank of India’s (RBI’s) views seem to swing from one extreme to another, like a pendulum. It started in 2016 with RBI requiring strict classification of non-performing assets (NPAs) and fraud accounts.

The Reserve Bank of India (RBI) said on Tuesday that a "compromise settlement" with borrowers aims to enable multiple avenues to lenders to recover the money in default without much delay.The RBI made the remarks while issuing a set ...

The Reserve Bank of India (RBI) said on Tuesday that a "compromise settlement" with borrowers aims to enable multiple avenues to lenders to recover the money in default without much delay.

While some reports had said that wilful defaulters can now get a new loan after 12 months of executing a compromise settlement, the RBI said this was not the case.