Suspected misappropriation of public money is the outcome of diversion of funds by company promoters. It has been reported that on account of some reasons, bleeding banks do not usually come forward to lodge complaints seeking a probe (“CBI opens probe into firms defaulting on public bank loans,” Aug.16). The top managements, who are the sanctioning authorities, are themselves responsible for lapses in appraisal, sanction and follow-up of such loans. Big ticket loans are usually sanctioned by a committee comprising top management officials or by the board. Staff accountability, therefore, gets diluted and it is difficult to hold any single official responsible for the negligence.
There is another angle. How can lending banks have expertise about different industrial segments and take on big exposures? Further where group banks lending is involved (read consortium lending), it is only the lead bank that makes an appraisal while other member banks of the consortium just participate in lending. The lead bank may be the biggest of the lot but that is not a guarantee for the quality of the appraisal.
The volume of stressed assets is on the rise, reaching the double digit percentage, viz, 10 per cent, which is an alarming situation.
Big ticket loans becoming bad are on the upswing, the reason being the drive to expand the business volume. Most large loans can be traced to the initiatives of the top and not the lower ranking officials. Often, the lead bank appraisal note is just circulated among banks and loans are approved without a proper internal bank-centric independent assessment.