State-run banks to tighten scrutiny of ₹250 cr+ loans
New Delhi, Apr 18, 2025
Synopsis
To bolster risk management, banks will increase scrutiny of loans exceeding ₹250 crore, emphasizing post-sanction monitoring. State-run banks will re-engage Agencies for Specialised Monitoring (ASMs) in consortium lending, enhancing early warning systems for fund diversions. These measures align with the government's strategy for early recognition and resolution of stressed assets, promoting prudent lending.
Banks are set to enhance scrutiny and oversight of loans exceeding ₹250 crore, with a renewed focus on strengthening post-sanction follow-up processes, said executives familiar with the developments.
As part of the ongoing reform agenda, state-run banks will renew the engagement of Agencies for Specialised Monitoring (ASMs) in consortium lending cases, involving large or specialised credit exposures. The next phase will involve capacity building and a comprehensive review to assess the effectiveness of the ASM framework, the executives said.
"This will further strengthen the existing risk management processes and ensure strict monitoring of post-loan sanctions," said one of the executives, requesting anonymity. "Lenders can identify early warning signals based on past cases, specially fund diversions and take appropriate action wherever required."
Under the Enhanced Access and Service Excellence, or EASE Reforms Agenda, state-run banks have started full segregation of pre- and post-sanction roles with respect to large loans, and the appointment of ASMs for loans above ₹250 crore.
"These measures are aligned with the government's strategy of early recognition and resolution, aimed at promoting prudent lending, improving credit flow to deserving borrowers, and minimising the future build-up of stressed assets," said the executive cited above.
"Banks through the Indian Banks' Association (IBA) have kickstarted the process of renewal and fresh empanelment of ASMs till 2028. In case of exposure in specialised sectors, services of ASMs may also be utilised from the post-sanction stage till the completion of the project or repayment of the loan as per the requirement of the bank," said a second executive.
Already under EASE 8.0, public sector banks are working towards setting up a common portal for consortium lending, a shared collections entity, and an integrated bad loan recovery mechanism as part of a government initiative to foster collaboration and drive business impact.
In the first nine months of FY25, PSBs reported a 31% on-year growth in aggregate net profit to a record ₹129,426 crore and an aggregate net NPA outstanding of ₹61,252 crore.
[The Economic Times]
