Convey credit decisions early: RBI

Banks given 30 days to put in proper system of loan approval

The Reserve Bank of India (RBI) has come down heavily on banks for delaying announcements on decisions relating to credit, especially in the case of infrastructure projects. It asked banks to clearly mention the procedure for sanctioning loans and timeframes in this regard, adding banks should institute a mechanism to review pending applications.

“It has been brought to our notice that there have been inordinate delays on the part of banks in conveying credit decisions, leading to delays in project implementation. While banks are required to carry out necessary due diligence before arriving at such decisions, timely and adequate availability of credit is a prerequisite for successful implementation of large projects,” RBI said in a communication to banks on Monday.

A few probes and arrests have made bankers go slow on loan approvals. Last month, the Central Bureau of Investigation arrested S K Jain, chairman and managing director of Syndicate Bank. It was alleged Jain had taken a bribe to extend credit facilities.

Earlier, RBI had mandated timeframes within which loan applications of up to Rs 2 lakh would be disposed of should be indicated at the time of acceptance of the applications. “It is felt a similar practice of time-bound decision-making might be required in the case of other loans, too,” RBI said.

For the fortnight ended August 8, year-on-year credit growth in the banking sector fell to its lowest in about four years. RBI data showed for that fortnight, credit grew 11.64 per cent year-on-year, against 13.29 per cent in the fortnight ended July 25.

The government has identified infrastructure projects worth about Rs 7 lakh crore, the implementation of which could be expedited. Banks have been asked to play a proactive role in bringing these projects back on track.

While the central bank has asked banks to take prompt decisions, it added, “There should not be any compromise on due diligence requirements. Banks might make suitable disclosures on the timelines for conveying credit decisions through their websites, notice boards, product literature, etc,” RBI said.

Banks have been asked to put in place a loan-approval mechanism in 30 days.