With the rise in fund diversions, banks have banded together and appointed as many as 83 supervision agencies to monitor loan end-use, according to State Bank chairman Rajnish Kumar. According to the chairman of the largest lender, there have been occasions where an individual or a business borrows from one bank and then uses a current account facility from another bank or banks to redirect funds.
“One of the measures that banks are doing to discourage such misuse is hiring oversight authorities,” Kumar told reporters. He also indicated that lending practices would need to adjust.
“The consortium discipline, or multiple banking discipline, needs to be strengthened,” he added, emphasizing that the regulator must also play a part. Kumar expects a pick-up in credit growth in the second half, despite the slow start.
“When comparing year-over-year growth, we see a 13 percent increase. We would be very pleased if this persists or stays at the same pace in the second half. We won’t know how much credit we’ll need until the second half “Kumar said. In terms of liquidity conditions, he said that there is sufficient liquidity in the market at the sectoral level, citing the RBI’s immediate announcement of a number of steps to boost liquidity for NBFCs following the budget.
