17 Jun 2023

Why Have Bank Unions Expressed Displeasure Over This New Move Of RBI?

Mumbai: The recent move by the Reserve Bank of India (RBI) to allow willful defaulters involved in frauds to settle their dues with banks seems to be mired in controversy. 

In a notification titled "Framework for Compromise Settlements and Technical Write-offs" on June 8, the RBI said that without prejudice to ongoing criminal proceedings against bank debtors in respect of willful defaulters or fraudulent accounts, compromise or technical write-offs can be done.

According to the new RBI guidelines, a willful defaulter or a company involved in fraud can get a new loan after 12 months of compromising with the bank.

The All India Bank Officers' Confederation (AIBOC) and the All India Bank Employees' Association (AIBEA) claim to represent the collective voice of over six lakh bank staff.

Both of them have strongly criticized this move of RBI under which banks have been allowed to settle the loans of willful defaulters under compounding solution.

RBI move could impact integrity of banking system

These associations have said that the RBI's move could impact the integrity of the banking system and undermine efforts to effectively deal with willful defaulters.

Wrong message to honest borrowers

They have also said that allowing compound settlement for accounts classified as fraud or willful defaulters is an affront to the principles of justice and accountability. 

According to these associations, this not only rewards unscrupulous borrowers but also sends a wrong message to honest borrowers who try to meet their financial obligations.

RBI condoning wrongdoings of willful defaulters


Along with this, these associations have also said that it is worth noting that willful defaulters have a significant impact on the financial stability of banks and the overall economy. 

By allowing them to settle their loans under the settlement, the RBI is essentially condoning their wrongdoings and putting the burden of their misdeeds on the shoulders of common citizens and hardworking bank employees.

Honest borrowers are never given an opportunity to negotiate loan: Cong

The opposition Congress party has targeted the government regarding this move of RBI.

Senior Congress leader and party's communications general secretary Jairam Ramesh tweeted that the RBI should explain why it changed its own rules on 'willful defaulters' and 'fraudsters'.

Jairam Ramesh also issued a statement saying that "Honest borrowers - farmers, small, and medium enterprises, middle class are burdened with EMIs. They are never given an opportunity to negotiate the loan or reduce the burden. All kinds of facilities are being given to the rich capitalists of BJP.

"But the government has now given way to fraudsters and willful defaulters like Nirav Modi, Mehul Choksi and Vijay Mallya to come back to their earlier position. While honest Indians are struggling to repay their loans."

The Congress says that "the RBI should explain why it thought these directions were necessary at the present time, despite repeated instructions and warnings to the contrary."

The party has also said that the RBI should tell whether there was any pressure from the Modi government to issue these instructions.

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