FinMin snubs banks for reckless lending

Moneycontrol Bureau

The banking and financial services secretary, Rajiv Takru, accused bankers of reckless lending (to corporates), which in turn, has led to significant rise in bad loans.

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"Banks' first job is to protect the deposits of the account-holders who place their hard-earned savings with the bank. There is no scope for reckless lending. We don't expect it (from any of the banks). The balance-sheet of the company (borrower) has to be checked properly before conducting a credit appraisal," he said while addressing a gathering in Mumbai.

Taking a dig at the recent spate of corporate restructuring cases, Takru suggested that CDR should only be allowed for those cases that are found to be bona fide.

"Do hand-holding in genuine cases but otherwise get nasty (with the wilful defaulters," he said.

Referring to the dichotomy in retail and corporate lending, Takru questioned as to why a retail borrower of just Rs 5 lakh had to make his life miserable to avail the credit facility.

New banking licence

Takru said that the new banking guidelines have to be seen in terms of promoting financial inclusion. The 25-percent rural branch mandate is not negotiable at all.

He suggested banks to devise human resources strategy wherein banks will be able to send their young officers to rural branches offering opportunities of for career growth.

"Rural India holds a huge potential for bank deposits. Young unmarried people are with less family responsibilities can be asked to work for rural branches. Senior officials are generally bound by lot of family responsibilites," he said.

Takru announced that the banking licences were expected be finalised by March 2014. However, there is no clear mandate on the number of licences to be issued. It all depends on the quality of applicants and prevalent economic conditions.

Cobrapost expose & CA

"The expose reveals a kind of casualness in the banking system. The degree of irregularities is a matter of great concern," Takru said.

"Chartered accountants have a role to play here. It is their job to point out the lapses. A chartered accountant's licence should be cancelled if he or she certifies a balance sheet which is full of non-disclosures."

Financial inclusion

On the issue of financial inclusion, the financial services secretary pointed out that a mere of opening of bank account will not serve the purpose. An account has to be active doing frequent transaction.

"There has to be a system which encourages people to transact though their bank accounts and move away from the concept of using cash," he said.

saikat.das@network18online.com