Banks hire scores of oversight agencies to keep tabs on end-use of loans

With increasing cases of fund diversions, banks have come together and empanelled as many as 83 oversight agencies to keep a tab on the end-use of loans, State Bank chairman Rajnish Kumar said Thursday.

The chairm of the largest lender said there have been instances where an individual or a company has borrowed from one bank and at the same time uses a current account facility with some other bank to divert funds.

“Hiring oversight agencies is one of the things being done by banks to prevent such misuse,” Kumar told reporters.

He also suggested that methods of lending will need to undergo change.

“The consortium discipline or the multiple banking discipline has to be improved and there the regulator also has to pay a role,” he said.

On the tepid credit growth, Kumar said he expects some pick up during the second half.

“If you look at the year-on-year growth, we are seeing 13 percent. Hopefully, if this continues or remains at the same level in the second half, we will be very happy. Only by the second half we will know how much credit is needed,” Kumar said.

Talking about the liquidity conditions, he said at the sectoral level, there is enough liquidity in the system as the RBI announced many measures immediately after the budget to improve liquidity for NBFCs.