NEW
DELHI: In an attempt to stem the tide of rising bad loans at Indian
lenders, a lobby group of banks has directed its members to ensure
that their staff neither give nor act on verbal orders for
sanctioning loans.
The Indian Bank's Association (IBA) issued
the directive recently after the Central Vigilance Commission pointed
out that junior executives at some banks were "coerced" to
sanction loans on verbal orders from their superiors.
"During
some vigilance complaints it was reported that loans were initially
sanctioned on verbal orders," a senior government official said,
confirming the IBA directive. "
This had led to discrepancy as
junior officers had claimed that they had sanctioned loans after
receiving orders to expedite the case from senior authorities."
The official said the IBA move will not only instill better
governance practices at banks but also check their rising
non-performing assets or bad debts.
According to the finance
ministry, gross non-performing assets of state-run banks rose to 1.92
lakh crore, or 3.99% of their gross advances, in June from 1.64 lakh
crore in March.
The
IBA move also comes at a time when the Central Bureau of
Investigation filed a case against a deputy managing director of the
State Bank of India for allegedly accepting bribe to sanction a loan.
An internal panel of the bank, however, said that the loan appears to
have been sanctioned in the "ordinary course of business".
The finance ministry has taken a series of measures recently
to curb non-performing assets of state-run banks.
It
has asked banks not to lend further to business groups that have
willfully defaulted on repayment of past loans.
Financial
services secretary Rajiv Takru had earlier said that financial
institutions and banks would do well to look at the entire group, its
functioning, management style and their exposure to that group.
Bankers,
however, say it will be difficult to implement such a measure in
letter and spirit.
"Trust has been violated at both middle and
senior management at banks. So, to blame the top management for
individual action will be irresponsible," the chairman of a
state-run bank said on condition of anonymity.
"Instances
have been pointed out where senior officers have not taken direct
responsibility and juniors were made a scapegoat. In banking space,
strictly all action should be accounted for at all levels," said
MP Shorawala, an independent director at the Central Bank of India.
Amid-level banker at United Bank of India said there are
compulsions at the junior level when verbal orders are issued from
the top brass.
"It
is a Catch-22 situation because ultimately your performance is
appraised by your seniors. If you only go by written orders, then you
run the risk of being classified a non-performer or too bureaucratic
in approach," he said.
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