Soon, Banks to compulsorily declare NPAs as wilful default or fraud

In an effort to tighten the noose around loan defaulters, ministry of finance has written to all banks to start bifurcating non-performing assets as either wilful default or fraud. Banks have also been asked to prepare a list of loan defaulters for “naming and shaming” in public.

“We have written to all public sector banks to start naming and shaming all loan defaulters by preparing a list and putting them out on public platforms. The banks also will have to start stating what kind of non-performing asset (NPA) it has encountered. Simply stating an NPA won’t work anymore. The banks will have to come out in public about whether it is a fraud or a wilful default,” said a top official of finance ministry on condition of anonymity.

A wilful default is a situation where the borrower has the required capacity to pay but decides not to and a fraud is when the borrower siphons off his/her money to other mode of parking say shell companies and displays a false inability to pay.moneycontrol

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