Private Banks express disdain over FinMin's joint lending proposal
By Vaibhav Aggarwal
Aug 8, 2012
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Private sector banks have shown their dis-interest on finance ministry's proposal of joint lending on loans above Rs. 150 crore. The ministry had proposed that banks come together as a consortium and if the loan goes bad for one bank, every consortium member would mark it as nonperforming.

Ministry asked the Indian Banks' Association (IBA) to ask all the banks in the country for joint lending process. Private banks have expressed their discomfort with the NPA proposals. This is because of the recent examples where a single account behaved differently in various banks.

Kingfisher Airlines account became nonperforming for SBI, PNB and Bank of Baroda, while it remained standard for ICICI Bank. ICICI Bank later sold the account as capital receipts to Srei Venture Capital for Rs. 430 crore.

Implementation of securitization under the SARFAESI Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) would be a problem, stated a banker. As per the SARAFAESI Act, a bank can not recover assets unless the loan becomes nonperforming. The proposed move would also require changes to be made in the RBI policy.

The finance ministry proposal came in rise of increasing NPAs and recent frauds to protect the banking sector, under this if a borrower defaults on one/some member of the consortium, it would be uniformly classified as nonperforming by all the members.



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