Banks should monitor loans themselves
All public sector banks, which form part of a consortium that lends to companies, will be accountable for monitoring the performance of loan accounts. They will not be allowed to leave it to the lead banks, the finance ministry has said.business Updated: Mar 15, 2016 16:09 IST
All public sector banks, which form part of a consortium that lends to companies, will be accountable for monitoring the performance of loan accounts. They will not be allowed to leave it to the lead banks, the finance ministry has said. The move will help banks take timely decisions on loan accounts regardless of the lead bank. As the controversy over Vijay Mallya, promoter of now defunct Kingfisher Airlines, deepens after he allegedly fled the country, the Central Vigilance Commission and Central Bureau of Investigation have noted that there have been gaps in monitoring loans accounts
“Often everything is left to the lead bank—from monitoring of the loan account to what decisions need to be taken but what needs to be done is to ensure that all banks need to be equally accountable in monitoring loan accounts,” a senior government official who did not wish to be identified told Hindustan times.
The issue was also discussed in the recently held Gyan Sangam—the two day retreat for public sector bank chiefs. The finance ministry and Reserve Bank of India have also asked banks to put in place a system which will ensure that such NPA problems do not recur. While all banks have their own internal committees under the chairperson that monitor loan accounts, in most cases these panels have not been effective.
“In the case of Kingfisher, several banks that were in the consortium were of the opinion that all decisions would have to be taken by the lead bank (SBI is the lead bank)..that will not work,” the official said.
Non performing assets—loans that have turned unproductive for banks—have increased by about Rs 1 lakh crore during the April to December period of the current financial year. The gross NPA of the state owned banks has gone up from 5.43% as on March 2015 to 7.30% to touch Rs 3,61,731 lakh crore as on December 2015.