Likewise, as part of its new Directions, including 13 Amendment Directions as well as 1 Repeal Directions issued on April 27, the RBI has come up with the Treatment of Wilful Defaulters and Large Defaulters) - Amendment Directions, 2026.

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According to it, "If wilful default is observed in the internal preliminary screening, a bank shall complete the process of classification/ declaring the borrower as a wilful defaulter within six months of the account being classified as NPA in accordance with the instructions regarding asset classification contained in the Reserve Bank of India (Commercial Banks - Asset Classification, Provisioning and Income Recognition) Directions, 2026."

Earlier, for classifying the account as NPA or non-performing asset, the banks followed the Reserve Bank of India (Commercial Banks - Income Recognition, Asset Classification and Provisioning) Directions, 2025.

Wilful default is when you default in servicing the loan (EMI or principal) even when you are in a financial position to honour the same. The act involves engaging in all unlawful activities in order to get away with the debt liability at hand.

And now, as per the guidelines, the banks are directed to classify the account or borrower as a wilful defaulter within six months of the account being declared as a non-performing account (NPA).

Directions for asset classification, provisioning, and income recognition

The RBI has come up with the Reserve Bank of India (Commercial Banks - Asset Classification, Provisioning and Income Recognition) Directions, 2026 that aim at further strengthening credit risk management practices, improving comparisons across regulated entities, as well as aligning the regulatory framework with internationally followed financial reporting principles.

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