Non Cooperative Borrowers: A New Lending norms by RBI
Indian economy was witnessing a heavy turmoil in the previous years and in the current year also this is, to the some extent continuing. However, we are witnessing some comforts where the Whole- sale price index have come to zero and the consumer price index is much within the comfort level.
Things are getting improved and probably this would continue in the future but one thing is worrisome is that the Banks have invested huge amount in project which have not rolled out and are idle due to some policy matters. Due to this, Banks are having high NPAs and as a resultant of which they have to provide the higher provision with respect to the non-performing assets.
The Apex Bank has taken a lot of initiatives to strengthen the recovery system of Banks. They had come up with the wilful defaulter provision and in some of the case it has been applied also (United Bank of India Vs Kingfisher Airlines and its promoter Vijay Mallya). But the provision of wilful defaulter seems to be very tough in practical applications as because the legal recourse is available with the borrower. Further, the lender is also required to establish that the fund was siphoned for declaring the borrower as a wilful defaulter.
Introduction of Concept of Non Cooperative Borrowers: To overcome the problems which is being witnessed at the time of labelling the wilful defaulters and to further strengthen the recovery mechanism of banks specially smaller banks, the Reserve Bank of India have come up the Non Cooperative Borrowers concept.
Non Cooperative Borrowers are the Borrowers, who have the ability to make the repayment of loans, obstruct the lender by
- Not providing the information sought
- And by not providing the access to collateral.
The definition of Non- Cooperative Borrowers will include the following persons:
- Individual
- Directors of the Companies
- Promoters of the Companies
However, Directors will not include the following persons:
- Directors nominated by the Government.
- Independent Directors
- Directors appointed by the lending institution.
Effect of declaring the Non- Cooperative Borrowers:
After declaring the non-cooperative borrowers, the following will take place
- The Banks which will be providing the fresh loans to the non-cooperative customers will have to categorize this loan as a sub standard assets and will have to make the provision as per the provisioning requirement.
- To avoid the higher provisioning from the books of banks, the fresh loan lending banks will exert pressure on the borrower to first clear the dues of existing lender.
Conclusion: The above mentioned rule will surely help in recovery of various bad loans and this will be very much instrumental in recovery of bad loan of small banks as because the borrowers care much for payment of dues of larger banks and they do not care much for repayment of dues of smaller banks. By the introduction of this, the larger bank will always exert pressure for clearing of the dues of the smaller banks and revenue
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Due date to Deposit Pre-2005 Currency Notes extended to June 30, 2015
Deposit Pre-2005 Currency Notes in Your Bank Accounts before June 30, 2015: RBI Urges Public
Soliciting cooperation from the public in withdrawing these notes from circulation, the Reserve Bank of India has urged them to deposit the old design notes in their bank accounts or exchange them at a bank branch convenient to them. The Reserve Bank of India has stated that the public can do so till June 30, 2015. Earlier, in March 2014, it had set the last date for public to exchange these notes was January 01, 2015.
The Reserve Bank has stated that the notes can be exchanged for their full value. It has also clarified that all such notes continue to remain legal tender.
Explaining the move, the Reserve Bank said that now the notes in Mahatma Gandhi series have been in circulation for a decade. A majority of the old notes have also been withdrawn through bank branches. It has, therefore, decided to withdraw the remaining old design notes from circulation. Not having currency notes in multiple series in circulation at the same time is a standard international practice, the Reserve Bank has pointed out.
The Reserve Bank will continue to monitor and review the process so that the public is not inconvenienced in any manner. (Source- RBI)
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