Monitor lenders, borrowers to stem bad loans, says RBI Deputy Governor SS Mundra

NEW DELHI: A senior Reserve Bank of India official has called for monitoring of the performance of both lenders and borrowers in view of increasing bad loans and said that banks should refrain from outsourcing the critical function of credit appraisal to athird party.

"Pricing of loans does not always follow the corresponding rating. Similarly, the computation of base rate by the banks has not been found to be very scientific and transparent," RBI’s deputy governor SS Mundra said on Monday. He added, "If credit processing is also outsourced, then I think it leads to a kind of situation what we are witnessing now." About Rs 95,000 crore of bad loans in public sector banks (PSBs) are of the 30 top defaulters. At the end of 2014, the gross bad loans of PSBs had risen to Rs 2.60 lakh crore.

Mundra said that the regulatory intent of resolving stressed assets through the means of a Joint Lender Forum (JLF) framework sometimes gets undermined due to differences among the bankers. "There are instances of banks complaining about non-cooperation by other lenders, taking unilateral action in reaching compromises or restructuring outside the JLF, declaring wilful defaults to stall the concerted operation of JLF," he said.On the issue of wilful defaulters and non-cooperative borrowers, the RBI deputy governor said that the errant borrowers should be quickly brought to book and recovery proceedings completed as early as possible.

Answering a question on whether the differences between the government and RBI on setting up of Public Debt Management Agency ( PDMA) have been sorted out, Mundra said that there are no differences.