The Hindu Business Line : PSB chiefs may get more loan sanctioning powers

What it means
The new proposal is to divide banks into those with loan portfolio of up to Rs 25,000 crore and those above that limit
For loan compromise and write-offs, the proposal is to authorise CMDs of smaller category banks to clear Rs 75 lakh and Rs 1 crore for larger banks.

New Delhi , April 6

In what could bring about a sea change in the lending activity of public sector banks, the Ministry of Finance and the Reserve Bank of India are considering a proposal to allow a major hike in credit sanctioning and loan write-off powers to Chairmen and Managing Director and Executive Directors of public sector banks.

The proposal, put forward by the Indian Banks' Association, seeks to enhance the maximum loan sanctioning power of a CMD under `group exposure' to Rs 200 crore as against the current maximum of Rs 30 crore. Any loan proposal beyond the maximum cap has to be necessarily approved by the board of directors of the bank.

The revision, if it takes place, would be the first such exercise in nearly a decade. The extent of delegation of financial powers to CMDs and EDs by the board of directors was last revised in March 1997.

Increasing cap

At present, the sanctioning powers for CMDs stand at a maximum Rs 15 crore for banks having aggregate loan portfolio of Rs 5,000 crore, while for CMDs of banks having a credit portfolio of above Rs 5,000 crore, the cap is set at Rs 30 crore.

The new proposal is to divide banks into those with loan portfolio of up to Rs 25,000 crore and those above that limit. In the former, it is proposed that CMDs would have powers to clear loan proposal up to Rs 60 crore for a single borrower and Rs 120 crore for group exposure. However, CMDs of banks with larger credit portfolio (above Rs 25,000 crore) would have powers to sanction up to Rs 100 crore for single borrowers and Rs 200 crore for group exposure.

For loan compromise and write-offs, the proposal is to authorise CMDs of smaller category banks to clear deals of up to Rs 75 lakh, while for the larger banks a limit of Rs 1 crore is being proposed. At present, CMDs can clear write-off/waivers of up to Rs 50 lakhs.

Since the proposal of financial powers for EDs has been retained at 75 per cent of the CMDs powers, there would be a commensurate hike for them linked to the Chief Executives new powers.

Chidambaram's nod

The proposal to hike the financial powers of the top brass of banks was discussed at the Finance Minister, Mr P Chidambaram's recent meeting with Chief Executives of PSU Banks. It was earlier proposed that the boards of directors of various banks should try to give assent to the revised powers by April 1.

However, bankers said it was felt that the RBI and the Government should examine the issue further before a final decision is taken on the matter.

There has been demand from bankers to review the existing limits since it has been quite some time that the earlier ceilings were fixed. Bankers had pointed out that there was an urgent need for a hike in the powers keeping in view the multi-fold growth in business of banks since March 1997 when the last revision took place.

Top bankers also felt that such a hike would allow State-owned banks to become nimble-footed in dealing with credit proposals.

More Stories on : Financial Policy | Public Sector Banks | Credit Market

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Suzlon, subsidiaries under I-T survey

`Huge scope for telecom gear manufacture'

Govt confident of holding price line: Chidambaram

OVL to acquire 15 pc stake in Brazilian oil field

Sops for country-specific export promos likely

BHEL to go in for nuclear tech tie-up by July-end

`Discovery Travel ahead of Star World, Zee Café in terms of viewership'

Infosys to consider bonus

PSB chiefs may get more loan sanctioning powers

SEBI final report on IPO scam soon

Zee bags telecast rights in non-ICC member nations