Ministry asks state lenders to avoid undue loan delays

In a move that could make it easier for customers to get quick loans from state-run banks, the finance ministry has written to public sector lenders to expedite decision-making on disbursal of loans. In the backdrop of complaints against public sector banks (PSBs) over undue delays in approving loan applications, the ministry has set timelines for approvals at various levels.

“All loan proposals to be approved at the head office level may be reviewed on a fixed day by the chairman & managing director or the managing directors and executive directors together to ensure there is no pendency beyond three months,” reads the ministry directive.

With rising interest rates and high inflation denting the bottom line of small businesses, the ministry had last month asked banks not to increase the equated monthly instalments of borrowers of car loans and housing loans, small and medium enterprises, village industries and artisans.

Instructions were issued that all loan proposals to be approved at the zonal office level should also be reviewed by the zonal managers on a fixed day in a week, so that they were not left pending beyond 45 days.

Applications to be disposed by branch managers should be taken up at district coordination committees on a monthly basis. Experts said that would benefit small borrowers immensely. The directive comes at a time when some banks are going slow on approval of loan applications to avoid a rise in bad loans. For the fortnight ended August 26, the sequential credit off-take of all scheduled banks declined 0.1 per cent to Rs 41.70 lakh crore.