Bankers should know as much as borrowers know about the business for which they are seeking loan, Central Vigilance Commissioner K V Chowdary said today, as he suggested change in some processes to check bad loans.
Bankers should know as much as borrowers know about the business for which they are seeking loan, Central Vigilance Commissioner K V Chowdary said today, as he suggested change in some processes to check bad loans.
Referring to the problem of non-performing assets (NPAs) of the banks, he felt that the bankers were in the wrong business of lending for term loans.
Chowdary said people with history or accounting background were found to be assessing a person's suitability for the loan merely because they were certified as chartered accountant.
"There is a need to have a re-look at this thing," he said, while addressing an event here.
Sharing his experience as an Indian Revenue Service officer, Chowdary said if you don't know what business you are taxing then your understanding of the way the income gets generated or could get generated is so poor that you cannot distinguish a software business form a grocery business.
"This what exactly happened with the banks. Banks started lending for term loans and long term finances which hitherto were being done by development financial institutions which had at least on paper technical experts, each one of them supposed to know working of sectors like infrastructure or power sectors," he said, hinting at what has probably gone wrong with the bankers and resulted in NPAs.
Chowdary felt that the bankers are in the wrong business of lending for term loans because "if you have to lend for a business I believe you should know at least as much as the borrowers know about the business".
The CVC said there are many certifying agency, some of them having very high reputation, who do not have the professional qualification.
"But still they have the stamp in their hand and they can put the stamp and sign and we would all believe he is CA and he is a valuer," he said emphasising on "some kind of discipline" to check all this.
Chowdary was speaking during a lecture, organised by Central Vigilance Commission, on "State and Market in India" by former RBI Governor Y V Reddy.
(This article has not been edited by DNA's editorial team and is auto-generated from an agency feed.)
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