Dheeraj Tiwari, ET Bureau May 23, 2012, 03.11AM IST
NEW DELHI: Grappling with a rising tide of bad loans, state-run banks are trying to cobble together a joint front to evaluate and extend loans to large projects.
The proposed system, being developed in consultation with the finance ministry, will require banks to form a consortium to appraise commercial projects seeking to borrow large funds but does not fix a limit as of now.
"The idea is to set up a uniform system of appraisal for all 26 state-run banks to rein in bad loans and ensure prudent lending," a finance ministry official said. "The system will ensure that an individual bank does not have excessive exposure to one borrower."
The finance ministry has asked smaller banks to give loans above Rs 150 crore only through a consortium.
Non-performing assets, or bad loans, of nationalised banks rose to 2.9% of their total lending in December 2011 from 2.3% in March. Gross non-performing assets of these banks stood at Rs 59,397 crore at the end of December, finance minister Pranab Mukherjee told the Parliament on Tuesday.
According to ratings agency Crisil, bad loans of state-run banks will rise to 3.2% of their total lending, or Rs 2 lakh crore, by March 2013.
The new system will ensure that banks share data of all existing loans to corporates and large borrowers. This will help them take an informed decision, the finance ministry official quoted above said.
Banks already follow a prudent exposure limit, but the government wants to add another layer of protection to avoid a repeat of Kingfisher Airlines-like situation. Public sector banks have together lent Rs 5,608 crore to the troubled airline. Of this, the exposure of State Bank of India alone is Rs 1,580 crore.
Much of this loan is at the risk of becoming a bad debt.
Banks, however, say they are not sure how the new system will work out. "Common appraisal system will automatically mean that most of the lending will be done through the consortium route," chairman of a PSB said. "But we will have to see the outcome of the final policy before stopping individual lending."
To ensure that the common appraisal system does not delay loan sanctions, the finance ministry has asked banks to set up zonal panels. "We have asked banks that this committee should meet at least once a week for quicker processing of loan applications," the finance ministry official said.
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