oppn parties Will Bankers Now "Lend Without Fear"?

News Snippets

  • India's sovereign green bonds were oversubscribed four times as the RBI received 266 bids worth Rs 32892cr agaisnt the target of Rs 8000cr
  • Google tweaks its Android and India app store policy to allow manufacturers and users to choose certain things instead of compulsorily using Google apps after the CCI order and fine for unfairly dominating the market
  • Former US secretary of state calls former Indian external affairs minister Sushma Swaraj a "goofback" and a "hinterland political hack". MEA S Jaishankar slams him
  • Jamia screening of BBC documentary on Gujarat riots cancelled after the university was turned into a fortress and later 13 students were detained by the police
  • Supreme Court grants conditional interim bail for eight weeks to Lakhimpur Kheri accused Ashish Mishra. The bail can be further extended based on his conduct. He was asked to stay outside Delhi-NCR and UP and surrender his passport
  • After the JNU administration tried to thwart the students from screening the BBC documentary on the Gujarat riots and PM Modi, now students of Presidency and Jadavpur universities in Kolkata have decided to screen it 5 times next week
  • While a US research frim Hindenburg says its analysis found the Adani group overleveraged and claimed that its bubble will burst very soon and that sent the price of group companies crashing (Adani companies lost a combined Rs 55000cr), Adani group said the report was 'baseless' and 'malicious'
  • This time Enforcement Directorate arrests TMC spokesperson Saket Gokhale under PMLA for money laundering
  • Padma awards announced on Republic Day: Mulayam Singh Yadav, architect Balkrishna Doshi and ORS pioneer Dilip Mahalanobis get Padma Bibhushan posthumously, Padma Bhushan ius awarded to Kumar Mangalam Birla and 8 others and 91 get Padma Shri
  • Stocks fall big time on Wednesday on F&O expiry, finalncial and banks take big hit: Sensex tumbles 773 points to 60205 and Nifty 226 points to 17892 even as the market volatility meter shoots up by 8.51%
  • World Cup hockey: Germany stun England 4-3 to reach semifinals; Netherlands beat Korea 5-1 to enter last four
  • Australian Open: Sania Mirza and Rohan Bopanna reach the finals
  • Suryakumar Yadav is named ICC Cricketer of the Year 2022 and Renuka Singh gets the ICC Emerging Cricketer of the Year 2022 award
  • BCCI gets a whopping Rs 4670cr in the auctions for the 5 teams in WIPL or as it will be known now, WPL. Adani Sportline gets Ahmedabad for Rs 1289cr while Mumbai Indians get Mumbai for 913cr
  • Calcutta HC overturns the hookah bar ban in Kolkata by saying that it is not an illegal trade
India Commentary Wishes A Happy Republic Day To All Its Readers /////// India Commentary Wishes A Happy Basant Panchami And Saraswati Puja To All Its Readers
oppn parties
Will Bankers Now "Lend Without Fear"?

By Sunil Garodia
First publised on 2020-01-30 20:21:56

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator.

The spate of well-publicized big-ticket loan defaults in public sector banks (PSBs) in the last couple of years and the subsequent inquiries by the CVC, CBI and CAG had made bankers jittery in handling such cases. No senior banker was willing to take a risk that could subject him or her to a witch hunt when the difference between genuine commercial failure and culpability or corruption on part of bankers was not spelled out clearly. Further, when the MD and CEO of the bank were made directly, and personally, responsible for the actions of officers down the line, the fear went right up to the top. It made for a scary scenario to find bankers not willing to sanction or disburse loans for big projects and files being held up. Not only that, but the bankers had also refused to take large, but necessary, haircuts while recovering part of the dues under IBC for the fear of being charged with impropriety.

Hence, the government has done well to allay some of these fears. Finance Minister Nirmala Sitharaman had told bankers a couple of weeks ago to "lend without fear" but words have ceased to have meaning in a situation where hundreds of top bankers are being investigated for culpability. It is good that the government has now followed up on the FM's exhortation to bankers and will modify the 2015 framework on large value frauds. It has announced that the MD & CEO would no longer be held personally responsible for large value loan defaults. It has delegated powers to the boards of banks to devise a suitable mechanism that would ensure compliance with the RBI and CVC guidelines in this regard. But more than shifting the responsibility to the board what is required is putting in place better risk management and monitoring systems in PSBs. This calls for structural changes in the banking system.

Concurrently, the government has announced the setting up of the Advisory Board for Banking Frauds (ABBF) to be set up by the Central Vigilance Commission. The ABBF will consist of finance professionals who understand the way lending decisions in banks are made (as opposed to some sleuths in CBI or even CAG who suspect any and everything). It will vet the delinquency in large value loans (above Rs 50cr) and act as a parallel vetting body as instructed by the Department of Financial Services. Inquiries in suspected frauds would start after vetting by ABBF. The government must ensure that the ABBF includes bankers from all specialized areas of banking so that it can take proper decisions. The government has also instructed banks to spruce up their internal vigilance mechanism by setting up officials' panels to speed up such inquiries. Hopefully, all this will translate into easing the pressure off bankers and they can now concentrate on taking informed and sound banking decisions and can now truly "lend without fear".