Banking and monetary regulator, Reserve Bank of India not happy with the fact that some banks are not being sufficiently active in monitoring the utilization of loans taken from them. RBI says this is the reason leading to diversification of funds.

The fact came in front of the apex bank while it was conducting a supervision of the practices adopted by banks in appropriate utilization of funds.

"The review revealed that the expected level of due diligence had not been exercised in some cases, facilitating diversion of funds by borrowers," the RBI said in a communication to Chairmen and Chief Executive Officers of banks.

The assessment conducted by RBI also found that some banks solely relied on Chartered Accountants' certification regarding to fund infusion and deployment of banks' funds.

"In the context of the above, it is advised that the efficacy of the existing machinery in your bank for post-sanction supervision and follow-up of advances may please be evaluated and made robust, wherever considered necessary," it said.

"Further, this would also act as a deterrent for borrowers to misuse the credit facilities sanctioned, and in the process, help build a healthy credit culture in the Indian banking system," it added.