Bank unions oppose RBI’s decision to allow compromise settlement of wilful defaulters

 

 

All India Bank Officers’ Confederation (AIBOC) and All India Bank Employees Association (AIBEA), representing the collective voice of more than 6 lakh bank employees, vehemently criticised the recent move by the Reserve Bank of India (RBI) to allow banks/lenders to settle loans of wilful defaulters under compromise settlement.

 

C H Venkatachalam, General Secretary, AIBEA said, “As key stakeholders in the banking industry, we have always advocated for strict measures to address the issue of wilful defaulters. We firmly believe that allowing compromise settlement for accounts classified as fraud or wilful defaulters is an affront to principles of justice and accountability. It not only rewards unscrupulous borrowers but also sends a distressing message to honest borrowers who strive to meet their financial obligations”. RBI in its ‘Prudential Framework for Resolution of Stressed Assets’ (June 7, 2019), made clear that the borrowers who have committed frauds/ malfeasance/ wilful default will remain ineligible for restructuring. Now this sudden change in the framework by the central bank to grant compromise settlements to wilful defaulters came as a shocker and it will not only lead to erosion of public trust in the banking sector, Venkatachalam said.

 

Rupam Roy, General Secretary, AIBOC said, “It fosters an environment where individuals and entities with the means to repay their debts choose to evade their responsibilities without facing appropriate consequences”. RBI should make list of the wilful defaulters public, introduce stricter penalties, enhanced scrutiny, and a more proactive approach to identify and prevent potential defaulters, Rupam Roy said. Additionally, bank union officials urge the RBI to prioritise the protection of the interests of honest borrowers and depositors who rely on the integrity of the banking system.