RBI/DOR/2025-26/166
DOR.FIN.REC.No.85/20-16-003/2025-26
November 28, 2025
Reserve Bank of India (Commercial Banks – Treatment of Wilful Defaulters and Large Defaulters) Directions, 2025
Table of Contents
Chapter I - Preliminary
Chapter II - Function of Board
Chapter III - Treatment of wilful defaulters
Chapter IV - Reporting of Wilful Defaulters and Large Defaulters
Chapter V - Preventive Measures and Role of Auditors
Chapter VI - Repeal and Other Provisions
Annex I - Format for submission of List of Large Defaulters
Annex II - Format for submission of data on cases of wilful default
Introduction
The objective of these Directions is to provide for a non-discriminatory and transparent procedure, having regard to the principles of natural justice, for classifying a borrower as a wilful defaulter by banks. The directions also aim to put in place a system to disseminate credit information about wilful defaulters for cautioning lenders to ensure that further institutional finance is not made available to them.
Accordingly, in exercise of the powers conferred by the Sections 21 and 35A of the Banking Regulation Act, 1949; and Section 11 of the Credit Information Companies (Regulation) Act, 2005, the Reserve Bank, being satisfied that it is necessary and expedient in public interest so to do, hereby, issues these Directions hereinafter specified.
Chapter I - Preliminary
- Short title and commencement
(1) These directions shall be called the Reserve Bank of India (Commercial Banks – Treatment of Wilful Defaulters and Large Defaulters) Directions, 2025.
(2) These directions shall come into force with immediate effect.
- Applicability
(1) These Directions shall be applicable to commercial banks (hereinafter collectively referred to as ‘banks’ and individually as a ‘bank’)
excluding
Small Finance Banks (SFBs), Local Area Banks (LABs), Payments Banks (PBs) and Regional Rural Banks (RRBs).
For the purpose of these Directions, ‘Commercial banks’ mean all banking companies, corresponding new banks and State Bank of India as defined under subsections (c), (da) and (nc) of section 5 of the Banking Regulation Act,1949.
(2) The restrictions on further financial accommodation to wilful defaulters and provisions regarding large defaulters contained in these Directions, shall apply to all entities regulated by the Reserve Bank, irrespective of whether they fall within the definition of ‘lender’ as provided in these Directions or not.
- Definitions
(1) In these Directions, the following definitions shall apply, unless the context otherwise requires:
- (i) “borrower” shall mean one who has availed credit facility from a bank;
- (ii) “credit facility” shall mean any fund based or non-fund-based facility, including off- balance sheet items like derivatives, guarantees and letters of credit, which a bank has extended to the borrower.
- (iii) “credit information company” (CIC) shall mean a company that has been granted a certificate of registration under Section 5 of the Credit Information Companies (Regulation) Act, 2005.
- (iv) “default” shall have the same meaning assigned to it in the
Reserve Bank of India (Commercial Banks – Resolution of Stressed Assets) Directions, 2025
- (v) “director” shall mean the director of a company which was classified as a large defaulter / wilful defaulter and who was associated with the company at the time when the acts of omission or commission by the company / its directors led to the default.
- (vi) “director identification number (DIN)” shall have the meaning assigned to it under the Companies Act, 2013.
- (vii) “diversion of funds” shall mean and includes the under- noted occurrences:
- utilisation of short-term working capital funds for long-term purposes not in conformity with the terms of sanction of credit facility;
- deploying funds availed using credit facility for the creation of assets other than those for which the credit was sanctioned;
- transferring funds availed using credit facility to the subsidiaries / group companies or other entities, by whatever modality, without approval of the bank / all the lenders in the consortium;
- routing of funds through any lender other than the bank or members of consortium without prior written permission of the bank or all the lenders of consortium;
- investing funds availed using credit facility in other companies / entities by way of acquiring equities/debt instruments without the approval of the bank or all the lenders of consortium; and
- shortfall in the deployment of funds vis-à-vis the amounts disbursed / drawn under the credit facility and the difference not being accounted for.
- (viii) “guarantor” shall mean a person / entity who has guaranteed the credit facility.
- (ix) "identification committee" shall mean the committee constituted by a bank for identifying a wilful defaulter and shall comprise of:
- (a) In case of a bank (other than a foreign bank), a Whole-Time Director other than the Managing Director and Chief Executive Officer (MD & CEO) / CEO or equivalent official as chairperson and two senior officials as members, not more than two ranks below the chairperson of the committee. In cases where there is only one Whole-Time Director other than the MD & CEO/ CEO or equivalent official, such Whole-Time Director may be part of the review committee if the post of MD & CEO / CEO or equivalent official is vacant. In such cases an official one rank below the Whole-Time Director may chair the identification committee, with two senior officials as members, not more than one rank below the chairperson of the committee.
Provided that in respect of credit facilities below a suitable threshold, a bank (excluding a foreign bank) may, as per their board-approved policy, set up the Identification Committee, with an officer just below the rank of the Whole-Time Director as chairperson and two senior officials as members, not more than two ranks below the chairperson of the committee. A bank (excluding a foreign bank) may form multiple identification committees under this instruction.
- (b) In case of a foreign bank, an officer not more than one rank below the Country Head / CEO as chairperson and two senior officials, not more than two ranks below the chairperson of the committee, as members.
- (x) "independent director" shall have the meaning assigned to it under the Companies Act, 2013.
- (xi) "large defaulter" shall mean a defaulter with an outstanding amount of ₹1 crore and above, and -
- where suit has been filed; or
- whose account has been classified as doubtful or loss (in accordance with the instructions issued by the Reserve Bank from time to time).
- (xii) "lender" shall mean any of the following entities which has granted a credit facility to the borrower:
- a commercial bank as defined under sub-sections (c), (da), and (nc) of section 5 of the Banking Regulation Act, 1949, including a Small Finance Bank, a Regional Rural Bank, and a Local Area Bank, but excluding a Payments Bank;
- a Scheduled Primary (Urban) Co-operative Bank;
- a non - Scheduled Primary (Urban) Co-operative Bank falling under Tier 3 and 4 in terms of the specifications contained in the
Reserve Bank of India (Urban Co-operative Banks – Licensing, Scheduling and Regulatory Classification) Guidelines, 2025
;
- an All India Financial Institution, viz., Export-Import Bank of India (EXIM Bank), National Bank for Agriculture and Rural Development (NABARD), National Housing Bank (NHB), Small Industries Development Bank of India (SIDBI), and National Bank for Financing Infrastructure and Development (NaBFID);
- a Non-Banking Financial Company (NBFC) falling under NBFC-Middle Layer (NBFC-ML) and above layers in terms of the specifications contained in the
Reserve Bank of India (Non-Banking Financial Companies – Registration, Exemptions and Framework for Scale Based Regulation) Guidelines, 2025
.
- (xiii) "nominee director" shall mean a director nominated by a lender, a regulatory authority, or the Central or a State Government.
- (xiv) "promoter" shall mean a person who has been named as such in a prospectus or is identified by the company in the annual return, and
- has control over the affairs of the company, directly or indirectly, whether as a shareholder, director or otherwise; and / or
- in accordance with whose advice, directions or instructions, the Board of Directors of the company is accustomed to act.
- (xv) "review committee" shall mean the committee constituted by a bank for the purpose of reviewing the proposal of the Identification Committee and shall comprise of:
- (a) In case of a bank (other than a foreign bank), the Whole-Time Director who is the MD & CEO / CEO or equivalent official of the bank as chairperson and two independent directors or non-executive directors or equivalent officials as members. Where the post of MD & CEO / CEO or equivalent official is vacant, the Review Committee shall be constituted with a Whole-Time Director in place of MD & CEO / CEO or equivalent official. In such cases, Review Committee shall be chaired by independent directors or non-executive directors or equivalent officials.
Provided that in respect of credit facilities below a threshold, a bank (excluding a foreign bank) may, as per their board-approved policy constitute a Review Committee with an officer of the rank of Whole-Time Director or equivalent official as the chairperson and two senior officials as members, not more than two ranks below the chairperson of the committee. A bank (excluding a foreign bank) may form multiple review committees under this clause.
- (b) In case of a foreign bank, the Country Head / CEO as chairperson and two senior officials, not more than one rank below the chairperson of the committee, as members.
Explanation: The Review Committee shall not be comprised of members who are part of the Identification Committee.
- (xvi) "siphoning of funds" shall be construed to have occurred if any funds availed using credit facility from bank are utilised for purposes unrelated to the operations of the borrower.
- (xvii) “suit filed account” shall mean an account in respect of which one or more entities regulated by Reserve Bank have approached courts or tribunals (including under Insolvency and Bankruptcy Code, 2016) for recovery of their dues, and proceedings are pending.
Explanation 1: An account shall be treated as suit filed if any application, appeal or execution is pending in continuation of the original recovery proceedings.
Explanation 2: Suit filed accounts shall be deemed to include accounts in which proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 or any other proceedings for recovery of the dues from the borrower or any other person liable to make payment of a debt under Acts governing co-operative societies are initiated and pending, and shall include the account of a debtor against whom resolution or liquidation proceedings have been initiated and are continuing.
- (xviii) “wilful default”
- (A) by a borrower shall be deemed to have occurred when the borrower defaults in meeting payment / repayment obligations to the lender and any one or more of the following features are noticed:
- the borrower has the capacity to honour the said obligations;
- the borrower has diverted the funds availed under the credit facility from lender;
- the borrower has siphoned off the funds availed under the credit facility from lender;
- the borrower has disposed of immovable or movable assets provided for the purpose of securing the credit facility without the approval of the lender;
- the borrower or the promoter has failed in its commitment to the lender to infuse equity despite having the ability to infuse the equity, although the lender has provided loans or certain concessions to the borrower based on this commitment and other covenants and conditions.
- (B) by a guarantor shall be deemed to have occurred if the guarantor does not honour the guarantee when invoked by the lender, despite having sufficient means to make payment of the dues or has disposed of immovable or movable assets provided for the purpose of securing the credit facility, without the approval of the lender or has failed in commitment to the lender to infuse equity despite having the ability to infuse the equity, although the lender has provided loans or certain concessions to the borrower based on this commitment.
- (xix) "wilful defaulter" shall mean:
- a borrower or a guarantor who has committed wilful default and the outstanding amount is ₹25 lakh and above, or as may be notified by Reserve Bank of India from time to time, and
- where the borrower or a guarantor committing the wilful default is a company, its promoters and the director (s), subject to the provisions of Paragraph 5(14), or
- in case of an entity (other than a company), persons who are in charge and responsible for the management of the affairs of the entity.
