Fearing probe, best bankers avoiding credit dept: Panel

New Delhi: A committee of bankers on resolution of stressed assets has said that the fear of investigation has resulted in the best people in the banks preferring to avoid credit roles, while calling for a revamp of governance and credit structures in state-run lenders.

Members of the panel headed by Sunil Mehta, however, said that the idea of the comment was not meant in a negative sense as banks now needed to rebuild and move on. While Bank of Maharashtra MD Ravindra Marathe’s arrest in an alleged cheating case galvanised lenders to publicly air their concerns, in private, they have been complaining about decision-making getting affected ever since former IDBI Bank chairman and MD Yogesh Aggarwal and the bank’s ex-deputy MD S K Batra were arrested in the Kingfisher case.

The government, however, is firm in its view that it will not intervene in actions taken by investigating agencies such as the CBI, and any charges of wrongdoing need to be acted against, officials told TOI. The actions have increased since Nirav Modi and Mehul Choksi fled the country after allegedly defrauding PNB.

The observation by the committee came along with recommendations that focus on strengthening risk management practices and hiring specialists to deal with the fresh set of challenges that public sector banks (PSBs) — which are still modelled on the economic realities of the 1970s and 1980s — are facing.

“Across banks, the number and skills of people in the credit area are lacking. Frequent transfers, lack of appropriate training adds to the challenge,” the Mehta committee said. It blamed the economic slowdown, delays in project approvals, aggressive lending practices during upturn, laxity in credit-risk appraisal and loan monitoring in banks, lack of appraising skills and wilful defaults & frauds for NPAs reaching Rs 10.6 lakh crore.

It has suggested an overhaul of the way PSBs are structured and recommended that the government should appoint a strong and independent board, comprising individuals with deep experience in credit. Further, it wants key board positions to remain stable over time so that executives are able to understand the bank’s credit philosophy and build experience.

Government officials said that several of the steps have already been initiated and some of the candidates shortlisted for appointment as managing directors by the Banks Board Bureau (BBB) will have a tenure of four-five years.