Bombay Rayon off Central Bank’s wilful defaulter list

Bombay Rayon Fashions has repaid one third of its

Rs 100 crores debt owed to the Central Bank of India. Earlier, it was reported that the Central Bank had referred Bombay Rayon Fashions case to Reserve Bank of India as ‘wilful defaulter’. The bank had sent a legal notice to Bombay Rayon which had defaulted on payment of loan amount of Rs 4,055 crores that was lent to them. The notice was issued after the textile company refused to allow the bank to conduct a forensic audit of its books.

After Bombay Rayon has managed to repay Rs 30 crore dues to Central Bank of India, it has got a nod for a debt restructuring package. In an address to the parliamentary consultative committee, finance minister P Chidambaram had said that public sector banks should be strict with wilful defaulters. Since then the finance ministry has been exhorting banks to take a tough stance with errant borrowers.

A borrower who fails to repay a loan, despite having the capacity to do so or diverts the borrowed money can be declared a wilful defaulter. Such a declaration takes place only after many rounds of consultations, and after it has been given adequate times to explain the position. The bank then submits the details of wilful defaulters to the RBI every three months.