Banks have become more cautious as there is rise in NPAs so they are now pushing more corporate loan accounts into consortium lending format. This is done in order to improve the access to information.
According to the suggestions of the banker's panel, the projects under non-investment grade should be mandatorily put under the consortium lending arrangement, irrespective of the size. The panel is formed by the Finance ministry to take care of this issue. The panel is headed by Mr. Diwakar Gupta, Managing Director and Chief Financial Officer of State Bank of India.
A senior Executive with another public sector bank (PSB) said that the banks have already started implementing the committee's suggestion in an informal way before the Finance Ministry decides on the matter any further.
A senior SBI official mentioned that bankers always push borrowers to be in consortium but when borrowers have a strong credit profile and good repayment record; banks don't want to get into consortium.
The official further added, "On the contrary, the whole purpose (of consortium) is to streamline decision making and to make cost uniform."
Chairman of PSB said, "We have already started to convince them (borrowers) to enter into a consortium, beneficial both for borrowers and the banks, as they (bankers) can exchange views regarding interest rates, margins, monitoring of account and future requirement of the borrowers".