A wilful defaulter is a borrower who has the ability to repay a loan but chooses not to do so. As per the Reserve Bank of India (RBI) guidelines, this classification is used for individuals or companies that have defaulted on their loan obligations deliberately. Being tagged as a wilful defaulter can have significant consequences, including legal action, restrictions on future borrowing, and damage to one's credit score.
What qualifies as a wilful default?
The RBI defines a wilful default as a scenario where the borrower has the capacity to repay the loan but does not do so. This can include situations where the borrower diverts funds for purposes other than those for which the loan was given, disposes of the assets given as security without the bank's knowledge, or fails to repay despite having sufficient resources. The classification is stringent and involves a thorough investigation by the lending institution to establish wilful intent.
How does it affect your CIBIL score?
Being tagged as a wilful defaulter will severely impact your CIBIL score, which ranges from 300 to 900. A wilful default tag can drastically lower your score, making it extremely difficult to secure any form of credit in the future, whether it's a personal loan, car loan, or even a credit card. Financial institutions rely heavily on credit scores to assess the risk of lending, and a low score signifies high risk.
What legal actions might follow?
Once tagged as a wilful defaulter, you may face legal actions from the lending bank. This can include the initiation of recovery proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. The bank can also file a lawsuit to recover the dues. Moreover, the wilful defaulter list is shared with other financial institutions, making it difficult to obtain new credit lines.
Can you remove the wilful defaulter tag?
Removing the wilful defaulter tag is a complex process and usually involves settling the outstanding dues. The borrower must present a case to the bank's grievance redressal mechanism or approach the RBI Ombudsman. If the borrower can prove that the default was not wilful, the tag may be reconsidered. However, this typically requires substantial evidence and legal support.
This information is for general understanding and does not constitute financial or legal advice specific to your situation.