RBI Dy Governor asks for a revamp in loan restructuring
By Joseph Samson
Aug 13, 2012
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RBI Deputy Governor Mr. KC Chakrabarty has asked the banks to stop neglecting retail, SMEs and agricultural sectors in loan restructuring segment, and added that lenders must come up with loan restructuring for individuals, small businesses and agriculture sector too.

While speaking at a seminar organized by Centrum Capital on corporate debt restructuring, Mr. Chakrabarty added that "Banks must have a structure to recast debt of individuals and the small-scale industry... they cannot leave it to the branch manager to do it."

Mr. Chakrabarty also smashed the myth that corporates only borrow during poor economic condition, he pointed out that certain companies even borrow during the economic boom.

He further said that certain banks did not follow the proper appraisal mechanisms while sanctioning the projects. For instance, while sanctioning infrastructure project loans, banks neglected vital elements like land acquisition cost, coal linkage cost, and environmental clearance. As much as 20% of the loans turn to nonperforming assets (NPA).

Role of promotors/top executives of such companies was also questioned by Mr. Chakrabarty, stating "Are they taking a pay cut? Are they using public transport to travel?"

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