'New settlement rules incentivise wilful defaulters'

THE RBI’s recent decision to allow banks to go for compromise settlement with wilful defaulters may incentivise such defaulters, according to some bankers.

- SACHIN KUMAR

However, they say that the new norms will boost the recovery for banks from distressed accounts.

The RBI, on June 8, issued a circular which stated that the regulated entities may undertake compromise settlements or technical write-offs of accounts categorised as wilful defaulters or fraud, without prejudice to the ongoing criminal proceedings against such debtors. As per the circular, proposals for compromise settlements in respect of debtors classified as fraud or wilful defaulter shall require approval of the board in all cases.