Dig deeper, not wider, for defaulter data

Banks will reportedly seek inputs from the Central Economic Intelligence Bureau (CEIB) before giving fresh loans to defaulters. Adding another layer of patrolling to ostensibly provide comfort to lenders will needlessly slow down lending. RBI already has a system of sharing information on defaults. Its Central Repository of Information on Large Credits (CRILC) helps banks to take informed credit decisions and recognise asset quality problems early on. This is akin to TransUnion CIBIL Limited that maintains records of an individual's payments pertaining to loans and credit cards from banks and other lenders. Banks extensively use the information available with CRILC for their due diligence.

The data (details of defaulters, asset classification, fraud, etc) gives a larger picture of the borrowers' liabilities across the banking system. It enables banks to identify stress in the account and take pre-emptive steps to safeguard their interests. But credit decisions involve judgement of risk, and bankers must do their job. Intelligence agencies are not equipped to advise banks on complicated commercial processes. Any ham-fisted scrutiny would also incapacitate banking.

Not all wrong lending decisions are mala fide. A distinction must be made between deliberate wrongdoing and a commercial failure that results in a loan default. There is no reason why other promoters, except those accused of wilful defaults, must be prohibited from securing fresh loans from banks. Large cases of bank fraud, too, are real. Prosecution must be launched on those found guilty of criminal negligence and they must receive punishment. Investigating agencies must ensure time-bound disposal and closure of cases that come to them.