Apropos “The fear factor” (May 5), I agree with your contention that over-vigilance is likely to have debilitating impact on decision-making by banks in India. While not wanting to comment on individual cases, I can say, based on my experience as a director on the board of a public sector bank (PSB), it was an accepted practice in the period mentioned for PSBs to put up proposals to their boards to advance fresh loans/ad hoc loans to big borrowers who had continuously defaulted on repayments and whose financial positions had significantly deteriorated. In many cases this was seen in steel, power, road construction and textile sectors. The Reserve Bank of India (RBI) was aware of this situation and did not frown on these practices. Practically, all the accounts of such borrowers have turned into non-performing assets and are now being put through the resolution process. Based on hindsight, to now penalise bankers (except where there was a fraud or clear malafide action) is not correct or desirable. Moreover the CBI
should build expertise to understand the issues involved in such cases. RBI should speak to the government on these issues so that pick-up in credit lending is not sacrificed at the altar of wrongly perceived fraud or malafide criminal/vigilance action.
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