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Public sector banks will now emphasize on credit requirements of good borrowers

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Public sector banks will now emphasize on credit requirements of good borrowers

Union Finance Minister Piyush Goyal has officially stated current consortium based lending systems will be tweaked for the removal of operational restrictions for flow of credit into major economic sectors. He added that public sector banks will now concentrate on the needs for credit amongst good borrowers. Public banks will look to meet the credit needs of approximately 4, 500 such good borrowers in addition to MSMEs and enterprises.

This will help state-run lenders revive their overall operations according to the Union Minister. This will also help in the restoration of credit flow into major economic segments and will assist organizations in meeting needs related to fixed assets and working capital. This will also be a boon when it comes to deploying extra liquidity currently held with public sector banks at interest rates which are competitive. Banks will thus be zeroing in on good-performing and genuine organizations with debt between Rs. 200-2, 000 crore. There are approximately 4, 500 such good company accounts with public sector banks in the consortium lending system.

Over 3-4 weeks, banks will be mapping the credit requirements of these good borrowers and will the evaluate organizations which have loan requirements up to Rs. 200 crore and this will help in taking care of credit requirements of MSMEs. This will help in backing sectors which are witnessing a rise in demand like consumer goods, automobiles, steel, power and cement. Banks will also be working out creditors’ agreements amongst these consortiums to address several issues. Loan decisions will be approved in case 66% of consortium lenders approve with regard to the guidelines laid down by the Insolvency and Bankruptcy Code.

A bigger share of consortium lending will be taken up by banks which are stronger. This is necessary since currently 11 out of 21 public sector banks have been put under the PCA (Prompt Corrective Action) framework of the RBI (Reserve Bank of India). Banks will also be establishing committees externally for ensuring a smoother process and adherence to deadlines along with technological upgrades wherever necessary.

 

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