RBI deputy governor SS Mundra calls for early recognition of stressed loans
Shishir Tripathi | March 24, 2015
Non-performing assets (NPA) have become a major concern for the banks and the gross NPAs of the public sector banks stood at Rs 2,60,531 crore, as on December 2014. Highlighting the issue of mounting bad loans, RBI deputy governor S S Mundra on Monday advised the bankers not to outsource their credit processing activities to third-party entities.
“The level of stressed assets in the system underscores the need to improve the monitoring of performance of banks as lenders as also the need for the borrowers to adhere to the loan covenants. A key point in this context for the banks is that they cannot afford to outsource their responsibility of credit appraisal which is a basic function to a third party. Lending is the most critical of banks’ functions and that cannot be outsourced,” Mundra said at an event hosted by the Assocham.
He also stressed on genuine efforts to be made for the early recognition of the stressed loans. While discussing the genuine and practical difficulties of running a business, asked the lenders not to “cast aspersions on the intent of the borrowers in such cases”.
He added, “A very common occurrence that strains the banker-borrower relationship is recognition of stress in loan accounts. An account can turn non-performing on account of genuine difficulties– an unfavorable business environment, certain unforeseen political, legal or judicial development. Projects do suffer from delays due to delay in getting permissions and witness cost and time - overruns. It may be difficult for even the most precise of business projections or the most efficient of credit appraisals to foresee these problems. It would be irrational on part of either the supervisor or the banker to cast aspersions on the intent of the borrowers in such cases.”
Further talking about the responsibilities of both the parties he said, “it is important in such cases that the bankers as well the borrowers do admit the problem at the earliest and initiate measures to revive the account including infusion of new equity, sanction of new debt, induction of new promoters etc."
For Full speech: Click Here
After Chandigarh, Puducherry and Dadra & Nagar Haveli, the government is now looking at subsidy transfer scheme for Public Distribution System (PDS) in Ranchi through a pilot project. But, there is a crucial difference between the Ranchi project and the initiative alrea
Much before the National Investigating Agency (NIA) had arrested seven Hurriyat leaders on Sunday in connection with the funding of terror activities in Kashmir, the agency had unearthed a racket involving undervaluation of the goods coming from the Pakistan occupied Kashmir for trade in Jammu and Kashmir
“The key to India’s success is its diversity,” said Ram Nath Kovind after being sworn-in as president at the Central Hall of parliament on Tuesday. “Our diversity is the core that makes us so unique. In this land we find a mix of states and regions,
The Airports Authority of India (AAI) has signed an agreement with Uttarakhand government and Uttarakhand Civil Aviation Development Authority (UCADA) to develop the civil aviation sector in the state. The agreement is aimed to identify relevant factors influencing the deve
Union minister of state for power, coal, new and renewable energy and mines, Piyush Goyal was present at the signing of power purchase agreements (PPAs) for purchase of 1050 MW of wind power under the ministry of new and renewable energy’s (MNRE) first wind auction scheme.
Government projects typically suffer from time overrun and cost overrun. There appears to be no project management discipline, and extension of time and escalation of cost rarely attract the kind of serious attention they should. There is no system of fixation of accountability for these substantial deviat