The Reserve Bank of India (RBI), on November 28, 2025, issued the Reserve Bank of India (Commercial Banks – Treatment of Wilful Defaulters and Large Defaulters) Directions, 2025 to establish a transparent, uniform and non-discriminatory procedure for identifying wilful defaulters. The framework aims to strengthen credit discipline, ensure adherence to principles of natural justice during identification, and prevent further institutional finance to wilful defaulters through systematic dissemination of credit information to lenders and Credit Information Companies (CICs).
These Directions clearly define wilful default, diversion of funds, large default, roles of guarantors, promoters and directors, as well as standards for committee-based identification and review. They also mandate banks to report wilful defaulters and large defaulters to CICs, maintain internal controls, strengthen preventive measures, and ensure auditors' involvement in detecting fund misuse. Importantly, the restrictions on providing additional finance to wilful defaulters extend to all RBI-regulated entities, even those outside the definition of “bank,” thereby ensuring a system-wide preventive mechanism.
Further, the Directions prescribe formats for reporting to CICs and provide detailed guidance for board oversight, review mechanisms, and compliance responsibilities. They also consolidate earlier circulars, ensuring harmonised enforcement and improved transparency across the financial system.
[Notification No. RBI/DOR/2025-26/166]
