SBI chief: Need to whittle down thrust on consortium lending

State Bank chairman Rajnish Kumar today called for scaling down thrust on consortium lending, saying over-dependence on this has only led to bad loan pile- up as it has been inordinately delaying loan appraisals.

He also said NPAs rose because bankers don't approach a borrower with the mind of a CBI/ED sleuth, but with trust.

Apportioning the blame for bad loans, which has almost touched 12 per cent of the system, on the government, the judiciary, banks and slimy borrowers, he said, "instead of lessening credit risk, consortium lending has mostly increased the pain as inordinate delay in loan appraisal, has most of the time, killed projects."
Listing out problems around the consortium lending or multiple banking systems, he said, "up to the mid-90s, it used to be consortium banking and later on, because there were complaints saying it was delaying the process, we went into multiple banking, but that has not resulted in faster decision-making. Instead, it has led to more NPAs."
Explaining that banking has always been based on trust, Rajnish said "banks do not have mindset of the Central Bureau of Investigation or the Enforcement Directorate but lend the money on trust, apart from paperwork. But that trust has been breached in many instances, as the NPAs show."
"Due to the IBC, there is awareness among borrowers that they need to change the way the business is done. A promoter cannot siphon off the money and run the company down and still continue to be the owner."