Distinguish between 'Diversion of funds' and 'siphoning of funds'.

Answer 5(a)(iii) Diversion of funds would be construed to include any one of the under noted occurrences: (a) utilisation of short-term working capital funds for long-term purposes not in conformity with the terms of sanction; (b) deploying borrowed funds for purposes/activities or creation of assets other than those for which the loan was sanctioned; (c) transferring funds to the subsidiaries/group companies or other corporates by whatever modalities; (d) routing of funds through any bank other than the lender bank or members of consortium without prior permission of the lender; (e) investment in other companies by way of acquiring equities/debt instruments without approval of lenders; (f) shortfall in deployment of funds vis-à-vis the amounts disbursed/drawn and the difference not being accounted for. Siphoning of funds should be construed to occur if any funds borrowed from banks/Fls are utilised for purposes un-related to the operations of the borrower, to the detriment of the financial health of the entity or of the lender. The decision as to whether a particular instance amounts to siphoning of funds would have to be a judgment of the lenders based on objective facts and circumstances of the case. The identification of the willful default should be made keeping in view the track record of the borrowers and should not be decided on the basis of isolated transactions/incidents. The default to be categorised as willful must be intentional, deliberate and calculated.