Lok Sabha Question No. 4325 (UNSTARRED), answered on 2021-03-22
Subject: Bank Loans
Ministry: FINANCE
Asked by: Gangasandra Siddappa Basavaraj

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA

## UNSTARRED QUESTION NO. 4325

TO BE ANSWERED ON THE 22 ND  MARCH 2021/ CHAITRA 1, 1943 (SAKA)

## Bank Loans

## 4325. SHRI G.S. BASAVARAJ:

Will the Minister of FINANCE be pleased to state:

- (a) whether  the  Government  proposes  to  strive  towards  making  banks  big  and  nimble  to provide  a  fast-track  system  to  disburse  loans  after  taking  quick  decisions  and  if  so,  the details thereof;
- (b) whether, in this fast-track and nimble process, the Government has asked bankers to be wary of Central Vigilance Commission's watchful eyes and if so, the details thereof; and
- (c) whether in this process the banks have been asked not to be keen on examining high-risk factors and if so, the details thereof?

## ANSWER

## THE MINISTER OF STATE FOR FINANCE (SHRI ANURAG SINGH THAKUR)

(a)  to  (c): Amalgamation  of   Public  Sector  Banks  (PSBs)  over  the  last  four  years  is  aimed  at enhancing the efficacy of the banking sector by creating strong and efficient banks by leveraging economies  of  scale  and  synergies  for, inter  alia ,  operational  efficiencies,  thrust  on  adoption  of technology  for  efficient  banking  and  greater  financial  capacity  to  support  economic  growth through  lending.  Further,  a  number  of   steps  have  been  implemented  under  the  Government initiated  PSB  Reforms  Agenda  to  make  PSBs  nimble  by  adoption  of  a  comprehensive  loan lifecycle  management  system,  including  an  efficient  system  in  loans  disbursement,  and  which include, inter alia , the following:

- (i) Institution of technology- and data-driven risk scoring and scrutiny systems in banks that comprehensively  factor  in  third-party  data  and  non-financial  risk  factors,  provide  for higher scrutiny of high-risk cases and improved adherence to risk-based pricing;
- (ii) Board-approved loan policies of PSBs now mandate tying up necessary clearances/approvals  and  linkages  before  disbursement,  scrutiny  of  group  balance-sheet and ring-fencing of cash flows, non-fund and tail risk appraisal in project financing;
- (iii) Consortium  lending  arrangements  have  been  made  effective  through  minimum  10% exposure  for  participation,  reducing  membership  to  a  manageable  number  and  a  model standard operating procedure for coordination among Joint Lenders' Forum members.
- (iv) For  time-bound  credit  decision  making  for  better  turnaround  time  of  loan  proposals, comprehensive  Loan  Management  Systems  (LMS)  have  been  put  in  place  in  banks  for personal segment and MSME loans;
- (v) Decision-making  layers  for  loan  sanctioning  have  been  rationalised  and  restricted  to  a maximum of three layers;
- (vi) Proactive reach-out and faster automated processing for personal loans have been enabled to greater use of dedicated sales channels, including digital channels, co-origination of loans in  tie-up  with  non-banking  financial  companies,  external  partnerships  and  dedicated marketing workforce.

To  support  decision-making  and  to  prevent  harassment  for  genuine  commercial  decisions  by bankers,  the  Prevention  of  Corruption  Act,  1988  has  been  amended  to  prohibit  conduct  of inquiry/investigation  of  offences  relatable  to  decision  taken  by  public  servant  in  discharge  of functions,  without  previous  approval  of  the  authority  competent  to  remove  him.  Further,  an Advisory  Board  for  Banking  and  Financial  Frauds  has  been  set  up  for  distinguishing  between commercial failure and criminal act in cases of suspected frauds over Rs. 50 crore, before initiation of investigation by the Central Bureau of Investigation.