- (1.) This is another instance of a nationalised bank failing to appreciate the purport of the Reserve Bank Master Circular on willful defaulters. The Master Circular provides a fair procedure before any person is declared a willful defaulter, since such declaration amounts to the person being regarded as a pariah in the financial and commercial world. Paragraph 3 of the Master Circular of July 1, 2011 provides for an initial committee of high functionaries of the concerned bank or financial institution to be entrusted with the preliminary decision to classify a person as a willful defaulter. The committee, as per the circular, should be headed by an executive director and consist of two general managers or deputy general managers as may be decided by the board of directors of the concerned bank or financial institution.
(2.) Clause (i) of paragraph 3 of the Master Circular requires identification of cases of willful default to be entrusted to such committee of higher functionaries headed by an executive director "with a view to imparting more objectivity...." Clause (ii) of paragraph 3 of the Master Circular mandates that a decision taken for classifying a borrower as a willful defaulter "should be well documented and supported by requisite evidence...(and)...should clearly spell out the reasons for which the borrower has been declared as willful defaulter vis- -vis RBI guidelines." Though clauses (i) and (ii) of paragraph 3 of the Master Circular loosely use the expressions "classify the borrower as willful defaulter" and "borrower has been declared as willful defaulter", it is apparent from the scheme of the procedure envisaged in paragraph 3 of the Master Circular that the decision or classification or declaration referred to in clauses (i) and (ii) thereof is tentative and not final.
(3.) Clauses (iii) and (v) of paragraph 3 of the Master Circular provide as follows: 3. Grievances Redressal Mechanism Banks/FIs should take the following measures in identifying and reporting instances of willful default: (i) .... (ii) .... (iii) The borrower should thereafter be suitably advised about the proposal to classify him as willful defaulter along with the reasons therefore. The concerned borrower should be provided reasonable time (say 15 days) for making representation against such decision, if he so desires, to a Grievance Redressal Committee headed by the Chairman and Managing Director and consisting of two other senior officials. (iv) .... (v) A final declaration as 'willful defaulter' should be made after a view is taken by the Committee on the representation and the borrower should be suitably advised.;