The Reserve Bank of India (RBI) Monday redefined the term non-cooperative borrowers to include those who block legitimate efforts of the lenders in recovering their dues, in order to allow banks to classify additional loans to them as standard assets.The cut off limit for classifying a borrower as non-cooperative borrower will be those who have borrowed over Rs.5 crore.In a circular, the central bank said a non-cooperative borrower is one who defaults on timely payment of dues despite having the ability to pay.A non-cooperative borrower is one who thwarts lenders' efforts in recovering their dues by: not sharing necessary information; denying access to the financed assets/collateral securities; and hindering sale of securities and others."In effect, a non-cooperative borrower is a defaulter who deliberately stonewalls legitimate efforts of the lenders to recover their dues," the RBI said.
In the case of an incorporated company, a non-cooperative borrower includes the company, its promoters and directors (excluding independent directors and directors nominated by the government and the lending institutions).According to RBI, banks and financial institutions (FI) should have a transparent policy for classifying borrowers as non-cooperative."A solitary or isolated instance should not be the basis for such classification. The decision to classify the borrower as non-cooperative borrower should be entrusted to a committee of higher functionaries headed by an executive director and consisting of two other senior officers of the rank of general managers/deputy general managers as decided by the board of the concerned bank/FI," RBI said.According to RBI if any new loan is sanctioned to a non-cooperative borrower, then the bank/FI should have higher provisioning against such loans as applicable for sub-standard loans.However the RBI has allowed the banks/FIs to treat such new loans as standard assets for the purpose of asset classification and income recognition.