It’s not the poor farmers or the middle class who are defaulting on their loans. It’s the country’s super rich, businessmen and the upper middle class with loan amounts of over `1 crore who account for a staggering 73% of the unpaid loans to banks. A wilful defaulter is one who has essentially not used the fund for the purpose it has been borrowed or when he has not repaid when he can do so; when he has siphoned off the funds or when he disposed of the assets pledged for availing of loan without the bank's knowledge. In a developing country banking system, the borrowing unit underreports its true financial position and defaults wilfully. It is observed that higher the loan capacity of the bank, the higher is the incidence of wilful defaulters. It is also observed that percentage of wilful defaulters is more in public sector banks compared to private banks. This study covers the concept of wilful defaulter, process of declaring wilful defaulters by the banks, RBI’s guidelines and action against wilful defaulters and also implications of wilful defaults on profitability of banks and ultimate decision making process of the banks.