RBI tells banks to guard against subversion of lending processes

Lending and financial institutions should carefully scrutinise loan seekers and evaluate their proposals more stringently, with immaculate documentation and periodic inspections and reviews, Financial Services Secretary R Gopalan said at the annual Bancon banking conference here in a video message.

In the recent past, banks have not been careful enough, which has led to “stray incidences of burgeoning of the NPA portfolios”, he said. Gopalan warned that, “We also need to be on guard against the processes being subverted by undesirable business parties, as has come to light recently in some places.”

“You should ensure that all procedures and due diligences consistent with board-approved guidelines are adhered to while approving loans,” Gopalan said, calling upon banks to strengthen their NPA monitoring and management systems to ensure that appropriate action was taken in case of payment defaults by borrowers.

The need, Gopalan said, is to go back to “basic banking” by extending their reach to unbanked sections of the country, in line with the goal of financial inclusion.