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Fall in the category of wilful defaulter or not ?

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Fall in the category of wilful defaulter or not ?

The concept of ‘wilful’ and ‘non-wilful’ as categories of (bank loan) defaulters was introduced by the Reserve Bank of India (RBI), the country’s apex bank in the year 1999.

This was done with an attempt to define in a clear-cut manner those individuals and companies who default on purpose and do not pay up, as against those who slip up on repayment owing to genuine financial strife.

The statistics show that the while the numbers may not appear to be many, the value is significant in some cases


Type of Lender Number of loans Value (Rs. in lacs)
Financial institutions 42 72793.71
Foreign banks 38 46297.42
Nationalised banks 3192 2877525.27
Private sector banks 792 1024974.98

As per the RBI, the following are the instances under which a wilful default has occurred:
• When the borrower (an individual or corporate) knowingly and deliberately does not pay off an outstanding loan, even when they have the capacity to do so.
• The funds are utilised for a purpose other than what they were intended for. For instance, a home improvement loan is taken by a borrower and utilised for a purpose other than home repairs and renovation.

• When the borrower siphons off the funds and is unable to justify as to where the funds were utilised. In such cases there is also no asset that can justify the usage of funds.
• When the borrower sells or disposes off the asset bought with the funds availed of, via the loan.

How do you know whether you are classified as a wilful defaulter? Quite simply, if you fit into any of the above four categories, as per the RBI definition you do. But if you’re unsure as to where exactly you fit in, your best bet would be to call for a copy of your credit report and go though it at length. This is the most foolproof way on how to check CIBIL defaulter, because a credit report is a detailed record of your credit behaviour, both past and present, and a lender views this information seriously prior to taking a lending decision. The credit score (which is derived from the credit report) indicates to the lender your willingness and ability to repay a loan. A higher score gets you the most competitive loan, while a bad or lower score may mar your chances significantly.
What then are the consequences of being a wilful defaulter? In case of a collateral-backed loan such a home or car loan, the bank or financial institution can levy a penalty on the defaulter, as well as seize the asset, which they can subsequently put up for sale, if the loan is not repaid. The proceeds from such sale will go towards recovering the balance loan outstanding. Further, once your credit score has taken a beating, remember that you automatically will fall into the lending institution’s defaulter list, and getting any credit in the future will be difficult. While nothing stops a lender from giving a loan for low CIBIL defaulters, you would need to compromise on the loan amount possibly, as well as on the rate of interest being offered. Hence being a wilful defaulter has lasting consequences that go beyond merely that particular loan which you have defaulted on.
If you look at the whole issue from the lender’s perspective, it does not matter whether the default was wilful or not. By merely not repaying the loan as agreed upon mutually, the lender’s bottom line takes a hit in any case, and the non-performing asset or NPA count goes up.
It has been brought to the table that banks should publish a list of such defaulters, which would serve a two-fold purpose – not only may the chances of those very defaulters paying up increase, but it is also likely to serve as a deterrent for others, to keep them from doing the same.
The bottom line
As a borrower, it is best to practice healthy credit habits, and make good on any loan repayment you may have going. Your credit history will possibly soon become a gateway to everything financial services related, and you definitely do not want to fall under the category of wilful defaulter and wind up on a blacklist. Therefore how to check CIBIL defaulter is something that can be easily done as mentioned, and keep your credit score high to ensure a worry-free financial future.

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