NON-PAYMENT OF DUES UNDER DERIVATIVES CONTRACT WOULD QUALIFY AS WILFUL DEFAULT

The Supreme Court has ruled that banks are entitled to declare any person as a willful defaulter who did not repay his dues under a foreign exchange derivatives contract. This is legal and within the various circulars issued by the Reserve Bank of India (RBI) in dealing with derivative transactions.

CONSEQUENCE OF BEING DECLARED A WILFUL DEFAULTER

• Additional financing facility from banks stopped
• Legal action against borrowers and guarantors
• Lenders may slap criminal suits in some cases
• Banks may initiate change of management in defaulting unit
• Promoters who siphon off funds barred from institutional funds' finance for five years