PSB branches bear the brunt of the loan circular

Heads of public bank branches are under tremendous pressure from seniors to stimulate loan growth, following a government diktat at a time when the demand for credit, especially from quality borrowers, is has practically disappeared.

Many state-owned banks have halted lending to borrowers with questionable repayment capacity, but pressure from senior executives to increase disbursements has placed bank branch officials in an unenviable position, two people with direct knowledge said. of the case on condition of anonymity.

The pressure to disburse loans to help businesses overcome the situation caused by covid-19 has been escalating for some time and intensified after banks received a notification from the financial services department on April 16 specifying the deadlines disbursement schedule and guidelines for contacting borrowers. Mint has reviewed a copy of the notification.

The finance ministry has asked banks for daily updates on Covid-19 lines of credit and reassessment of borrower working capital limits, the two people mentioned above said. “The general management requests situation reports from the zone managers, who in turn put pressure on the agency directors without understanding the constraints at the field level,” said the first person. Most people seeking emergency lines of credit failed to repay regularly and gave them new loans. would be difficult, said this person. Demand for credit was low “except for some who demand it to pay wages,” said the second person.

The circular of April 16 said: “In the context of the resumption of business activities from April 20, the origination, sanctioning and timely disbursement of funds-based and non-funds-based credits are essential. to the revival of economic activity. Therefore, banks are advised to place in the public domain their time-bound outreach and processing plans with clear step-by-step deadlines and communicate clear responsibilities and deadlines at all levels to ensure the supply of customers. loan requests and their assessment, sanction, documentation and disbursement. “

The Covid-19 emergency credit line must be processed and disbursed between three and six working days, he said. Revaluation of working capital up to 5 crores and more 5 crore must be disbursed within six to nine and 12-15 business days, respectively, he said.

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