The Reserve Bank of India (RBI) on November 28, 2025, issued the Reserve Bank of India (Local Area Banks – Treatment of Wilful Defaulters and Large Defaulters) Directions, 2025.
The following has been stated: -
•The RBI (Local Area Banks – Treatment of Wilful Defaulters and Large Defaulters) Directions, 2025, establish a transparent and fair process for classifying borrowers as wilful or large defaulters, with clear definitions, identification, and review mechanisms.
•Banks must report wilful and large defaulters monthly to credit information companies, ensure end-use of funds, and enforce penal measures such as restrictions on new credit.
•The Directions mandate internal audits, forensic checks, and accountability for auditors and third parties to prevent fund diversion or siphoning.
•They also provide guidance on handling compromise settlements, transferred loans, and accounts under resolution, ensuring compliance with RBI and other legal frameworks.
These directions shall become effective on November 28, 2025.
[Notification No.: RBI/DOR/2025-26/240 DOR.FIN.REC.No.159/20-16-003/2025-26]
