Money & Banking

SBI asks loan approval panels to be cautious while raising credit limits for borrowers

K Ram Kumar Mumbai | Updated on January 20, 2018

Move part of exercise to prevent loans from turning sour

In the backdrop of rising instances of loans turning bad and frauds in the banking system, State Bank of India has asked its loan sanctioning committees at various levels to be cautious in enhancing credit limits for borrowers.

India’s largest bank wants the committees to be mindful while processing requests for enhancement in working capital limits beyond 15 per cent of the existing limits within 12 months after the sanction/ enhancement.

In this regard, SBI has specifically flagged the issue of assessment of credit limits based on unauthentic, unverified financials submitted by borrowers / prospective borrowers leading to frequent and large enhancements in limits.

Depending on the loan size, the bank sanctions loans through seven credit committees, ranging from regional credit committee at the region level to the executive committee of the central board at the apex level.

A senior SBI official said the tightening of control at the loan sanction stage is aimed at curbing instances of frequent and large enhancement in credit limits.

With a view to ensuring realistic assessment of scale of operations (of the borrower) so that optimum credit limits are considered for sanction, the official said loan sanctioning authorities have to be convinced as to authenticity / reasonableness of data provided by customers.

Further, projected sales figures should be in sync with industry / sector / sub-sector growth and in case of variance by more than 20 per cent, deeper analysis needs to be carried out.

Similarly, projected cash flows submitted by the customers, need to be in sync with past sales and are to be cross checked with the credit summations in the account.

In the October-December 2016 quarter, SBI’s bad loans jumped by ₹15,958 crore following the asset quality review carried out by the Reserve Bank of India across the banking system.

Raman Uberoi, Business Head, Large Corporates, Crisil Ratings, said: “Asset quality pressures will remain intense for public sector banks through next fiscal.

“That’s because of the downturn in commodities, stretched cash flows of highly leveraged corporates and limited ability of banks in the current environment to recover monies from large exposures that have slipped into NPAs.”

Published on March 15, 2016

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