MUMBAI: Top bank executives urged the Central
Vigilance Commission and Central Bureau of Investigation to evolve a
transparent process to deal with issues at banks in order to remove the fear of
probe, which is preventing them from making decisions. The demand comes at a
time when public sector banks are struggling to recover from huge losses that
they posted in 2015-16 due to rising provisions for dud loans.
It is unfair to compare a past decision with present circumstances, they said during a meeting with CVC and CBI officials, as the circumstances and the state of the economy might have changed after a loan was given.
A similar stance was taken by Reserve Bank Governor Raghuram Rajan in April when he said: "We must look at what were the conditions under which loans were given by the banks, given the information that was known then and be careful about hindsight being 20-20."
During the meeting, bankers said also there could be procedures for the purchase of furniture and computers, and sanctioning of loans, but when it comes to settling for less with a defaulter, there is no "one-size-fits-all" approach as scores of subjective factors like ability, securities pledged, the current value of assets and so on have to be computed.
Speaking to ET, State Bank of India Chairman Arundhati Bhattacharya indicated that it is important to ensure the CVC-related matters are "process driven" and each case has to be dealt with differently. "You can't have anything absolutely cast in stone because every individual case is different. Therefore even the solutions will be different. There has to be a commercial basis to all of this and that has to be recognised and on the basis of that should be respected," she said.
The issue also gained prominence in the backdrop of the Enforcement Directorate questioning lenders' roles as it probes alleged diversion of loans by Kingfisher Airlines.
Earlier in the day, RBI Governor Rajan met senior bankers to discuss measures that could be taken to improve corporate governance within banks. "One of the chairmen suggested that the board should not be involved in sanctioning of loans. Another chairman suggested that focus should be on policy and risk management policies," said a senior banker present at the meeting.
During the meeting on corporate governance, Shikha Sharma, managing director of Axis Bank, and Kotak Mahindra Bank Executive Vice Chairman Uday Kotak made a presentation of how the board of a private bank should function. Deepak Parikh, chairman of HDFC, spoke on the measures that could be taken to run the board in a professional manner.
It is unfair to compare a past decision with present circumstances, they said during a meeting with CVC and CBI officials, as the circumstances and the state of the economy might have changed after a loan was given.
A similar stance was taken by Reserve Bank Governor Raghuram Rajan in April when he said: "We must look at what were the conditions under which loans were given by the banks, given the information that was known then and be careful about hindsight being 20-20."
During the meeting, bankers said also there could be procedures for the purchase of furniture and computers, and sanctioning of loans, but when it comes to settling for less with a defaulter, there is no "one-size-fits-all" approach as scores of subjective factors like ability, securities pledged, the current value of assets and so on have to be computed.
Speaking to ET, State Bank of India Chairman Arundhati Bhattacharya indicated that it is important to ensure the CVC-related matters are "process driven" and each case has to be dealt with differently. "You can't have anything absolutely cast in stone because every individual case is different. Therefore even the solutions will be different. There has to be a commercial basis to all of this and that has to be recognised and on the basis of that should be respected," she said.
The issue also gained prominence in the backdrop of the Enforcement Directorate questioning lenders' roles as it probes alleged diversion of loans by Kingfisher Airlines.
Earlier in the day, RBI Governor Rajan met senior bankers to discuss measures that could be taken to improve corporate governance within banks. "One of the chairmen suggested that the board should not be involved in sanctioning of loans. Another chairman suggested that focus should be on policy and risk management policies," said a senior banker present at the meeting.
During the meeting on corporate governance, Shikha Sharma, managing director of Axis Bank, and Kotak Mahindra Bank Executive Vice Chairman Uday Kotak made a presentation of how the board of a private bank should function. Deepak Parikh, chairman of HDFC, spoke on the measures that could be taken to run the board in a professional manner.
Courtesy The Economic Times
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