Banks are exploring the possibility of setting up a committee to advise them on loan revisions

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Banks are exploring the possibility of setting up an “expert panel” to advise them on loan restructurings, to give sanctioning authorities added comfort in their decision-making, amid concerns over recent allegations of mismanagement of the restructuring of distressed loan accounts.

“The proposed mechanism could cover the cases of restructuring in both the standard and non-performing account categories,” said an executive aware of the development, adding that the committee is reviewing the restructuring proposals Check threshold and comment on other cases.

This is because banks are under pressure to justify their business decisions and face undue scrutiny from regulators. Recently, State Bank of India had to issue a statement regarding Rs 22,842 crore fraud at ABG Shipyard Ltd. in which she denied that efforts were being made to delay the process of informing the authorities. “The lender’s forum conscientiously prevails with CBI in all such cases,” the bank had said.

Key executives from leading banks including the State Bank of India, Punjab National Bank, ICICI Bank and IDBI Bank will be part of a working group to finalize the structure of this proposed committee.

“The recommendations are part of the Indian Banks’ Association (IBA) action to provide bankers with protections from arbitrary action by law enforcement agencies,” the executive cited above said, adding that a formal mechanism could be put in place to be well-informed and compliant to go decision.

RBI considered creating an Overseeing Committee (OC) as part of the standards for resolution of large borrowers in 2016, but its most recent 2019 guidance on the Prudential Framework for Resolution of Stressed Assets made no mention of such a requirement.

Formed by RBI in 2017, the five-member OC included former Chief Vigilance Commissioner Pradeep Kumar, former Chairman of State Bank of India Janki Ballabh, former Chairman of L&T Finance Holdings YM Deosthalee, former Chairman of Canara Bank MBN Rao and then-SEBI -Member S. Raman. Formerly, the OC worked across several banks on cases referred to it by the banks.

“The proposed panel of experts could function similarly and could be chaired by an outsider such as a senior judge and other members brought in by financial institutions,” said another executive aware of developments.

The IBA has already hired senior counsel and former Attorney General Mukul Rohatgi and has sought changes to existing criminal laws to protect bankers from arbitrary arrests.

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