New Delhi, January 24, 2018

Panels to track loans above Rs.250 crore

Hoping to prevent further problems of bad loans in public sector banks, the Centre’s blueprint for reforms including responsible lending that includes setting up of specialised committees to track loans above Rs.250 crore and stressed asset management verticals to focus on recovery.

Unveiling the capital infusion plan for the fiscal for state-owned lenders, Finance Minister Arun Jaitley said the reforms would ensure governance of banks follows the highest standards.

“There is a need for institutional mechanism to ensure that the past is not repeated,” he said, noting that the NDA government “inherited a very major problem and therefore, we have been involved in finding a solution to the problem.”

Financial Services Secretary Rajeev Kumar stressed that there would be no interference by the government in commercial decisions of PSBs and efforts would be made to strengthen and empower boards of banks.

In case of consortium lending, banks are expected to keep a minimum exposure of 10 per cent and adopt Standard Operating Practices to improve coordination amongst all lenders. For corporate loans, all approvals would be tied up before disbursement. For loans above Rs.250 crore, specialised monitoring agencies would follow up post sanction and highlight any breach of covenants.

Banks would also be expected to set up stressed asset management verticals that would look at stressed assets and high-value Special Mention Accounts and focus on recovery efforts.
Core competence

Banks would also be expected to follow differentiated banking strategy and focus on sectors based on their core competence. Non core assets would be monetised and overseas branches and business units would be rationalised or closed.

The Banks Board Bureau would also review the reforms undertaken by PSBs on a quarterly basis and an annual survey would be done and the lenders ranked.

[The Hindu Business Line]