The Reserve Bank of India (RBI) has clarified and broadens the ambit of the deadly concept of “Wilful defaulter” that has been the talking point in Indian corporate circle
Henceforth entities that provide guarantee or surety for a loan are also liable to be tagged as wilful defaulters in cases where they refuse to make payment to the bank when the principal borrower has defaulted.
Not just companies but even individuals who manage companies and other companies within the group can be tagged as wilful defaulter by banks. In cases where guarantees furnished by the companies within the group on behalf of the wilfully defaulting units are not honoured when invoked by the banks /FIs, such group companies should also be reckoned as wilful defaulters
In case of a default on a loan by a borrower, the onus of repayment falls on the guarantor immediately. In cases where the guarantor refuses to pay despite having sufficient funds, such guarantors can also be declared as wilful defaulter by the bank.
As such, where a banker has made a claim on the guarantor on account of the default made by the principal debtor, the liability of the guarantor is immediate. In case the said guarantor refuses to comply with the demand made by the creditor/banker, despite having sufficient means to make payment of the dues, such guarantor would also be treated as a wilful defaulter.
However, this would apply to only prospective cases and not those that have already emerged,
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