India's bank unions have asked the RBI to renege on a compromise deal with willful defaulters

14 Jun 2023 , 09:25 AM

Earlier this week, the central bank decided to permit compromise settlements for wilful defaulters. On Tuesday, two of India’s major bank employee unions requested the central bank to reconsider and reverse that decision, arguing that it would undermine the stability of the banking sector.

A framework for lenders controlling technical write-offs and compromise settlements, including those categorized as fraud or willful defaulters, was published by the Reserve Bank of India (RBI) last week.

An agreement with the borrower to fully resolve the lender’s claim upfront, which may or may not involve a full recovery of dues, is referred to as a compromise settlement.

A borrower who willfully fails to make payments or make repayments to the lender despite having the means to do so is referred to as a defaulter.

In a joint statement posted on the social networking site Twitter, the All India Bank Officers’ Confederation (AIBOC) and the All India Bank Employees’ Association (AIBEA) said that the practice ‘not only rewards dishonest borrowers but also sends a distressing message to honest borrowers who strive to meet their financial obligations.’

According to them, the compromise settlement for fraudulent accounts is an ‘affront’ to the values of justice and accountability, and the RBI’s action was a ‘shocker.’

The RBI is sanctioning the wrongdoing of wilful defaulters by approving such settlements, they claimed in the statement, and shifting the blame for wrongdoing to bank personnel.

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