Representative Image | Photo credits: G. Ramakrishna
Bank unions AIBOC and AIBEA have opposed the Reserve Bank’s move to allow lenders Settle the debts of willful defaulters under compounding agreement,
The unions said in a joint statement that the RBI’s recent ‘Framework for Compromised Settlement and Technical Write-Off’ is a pernicious move that could compromise the integrity of the banking system and undermine efforts to effectively deal with willful defaulters. Could
All India Bank Officers’ Confederation (AIBOC) and All India Bank Employees’ Association (AIBEA) said in a statement, “As key stakeholders in the banking industry, we have always advocated strict measures to address the issue of willful defaulters “
Allowing compound settlement for accounts classified as frauds or willful defaulters is an affront to the principles of justice and accountability, it said, adding that it not only rewards unscrupulous borrowers but also sends a distressing message to honest borrowers who are unable to maintain their financial stability. Strive to fulfill the obligations.
The RBI in its ‘Prudential Framework for Resolution of Stressed Assets’ (June 7, 2019) clarified that borrowers who have committed fraud/misconduct/willful default will no longer be eligible for restructuring.
Now the sudden change in framework by RBI to give compound settlement to willful defaulters has come as a blow and will not only undermine public confidence in the banking sector but also depositors’ confidence.
This fosters an environment where individuals and institutions choose to shirk their responsibilities without facing appropriate consequences along with the means to repay their debts.
Such leniency serves to perpetuate a culture of non-compliance and moral hazard, causing banks and their employees to bear the brunt of the losses, it said, noting that willful defaulters have a significant impact on the financial health of banks. Has a significant impact on sustainability 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 ordinary citizens and hardworking bank employees.
The unions called upon the RBI to review and withdraw this decision and the central bank should give priority to safeguarding the interests of honest borrowers and depositors who rely on the integrity of the banking system.