With bad loans turning an increasingly heavy millstone, it’s time for enemies to turn frenemies on Banking Avenue.
The Reserve bank of India (RBI) has ordered banks to mandatorily share information on borrowers and public sector players have kicked off the process in right earnerst.
Union Bank of India, United Bank and Indian Overseas Bank said they have already started sharing details given by borrowers on their present and future cash flows with their co-lenders.
Under this system, two or more banks lend to a common borrower to finance business initiatives or big projects that involve huge amount of money.
“Banks have already started sharing information shared by the borrowers in case of multiple lending that involve significantly huge amount. RBI has given us some time to strengthen it further. By early next year, we expect a clear road map on it,” said a senior official from a public sector bank, who did not wish to be named.
According to market sources almost all banks have started sharing details on common accounts. Officials at the general manager level meet frequently for handing over the information on common accounts and borrowers.
“The credit problems of the common borrowers are discussed openly these days among the co-lenders which never used to happen earlier, which is a good banking culture. We are awaiting further clarity from RBI on effective implementation of it,” added the aforesaid official.
The main trigger for the move is rising non-performing assets (NPAs) or bad loans, and a number of cases being referred to the corporate debt restructuring cell.
As per RBI’s data, gross NPAs for public sector banks increased to 3.3% as on March 2012 from 2.4% a year ago. Also, the net NPA rose to 1.28%.
Banks have been sharing retail as well as non-retail credit information with credit bureaus siuch as Cibil, Experian and so on.
The RBI mandates banks to share the credit information with the respective credit bureaus. But none of the credit bureaus reveal the lender and they only share information on the loan amount and the number of lenders for the particular projects.
The central bank is in the process of talks with credit bureaus too to ensure smooth and effective information sharing. RBI is mulling to enhance the role of these bureaus from a provider of transactional data.
“The real challenge of the information sharing lies in the quality of data that has been shared by the banks. Hence timely reporting or update would be more effective and the effective sharing would definitely help the banks to control stress on bad loans,” said Satish Mehta, founder & CEO, credexpert.co.in.
Courtesy:
Aswathy Varughese l Mumbai
aswathy.rachel@dnaindia.net
Published Date: Dec 21, 2012
http://epaper.dnaindia.com/story.aspx?id=34772&boxid=17654&ed_date=2012-12-21&ed_code=820009&ed_page=15
The Reserve bank of India (RBI) has ordered banks to mandatorily share information on borrowers and public sector players have kicked off the process in right earnerst.
Union Bank of India, United Bank and Indian Overseas Bank said they have already started sharing details given by borrowers on their present and future cash flows with their co-lenders.
Under this system, two or more banks lend to a common borrower to finance business initiatives or big projects that involve huge amount of money.
“Banks have already started sharing information shared by the borrowers in case of multiple lending that involve significantly huge amount. RBI has given us some time to strengthen it further. By early next year, we expect a clear road map on it,” said a senior official from a public sector bank, who did not wish to be named.
According to market sources almost all banks have started sharing details on common accounts. Officials at the general manager level meet frequently for handing over the information on common accounts and borrowers.
“The credit problems of the common borrowers are discussed openly these days among the co-lenders which never used to happen earlier, which is a good banking culture. We are awaiting further clarity from RBI on effective implementation of it,” added the aforesaid official.
The main trigger for the move is rising non-performing assets (NPAs) or bad loans, and a number of cases being referred to the corporate debt restructuring cell.
As per RBI’s data, gross NPAs for public sector banks increased to 3.3% as on March 2012 from 2.4% a year ago. Also, the net NPA rose to 1.28%.
Banks have been sharing retail as well as non-retail credit information with credit bureaus siuch as Cibil, Experian and so on.
The RBI mandates banks to share the credit information with the respective credit bureaus. But none of the credit bureaus reveal the lender and they only share information on the loan amount and the number of lenders for the particular projects.
The central bank is in the process of talks with credit bureaus too to ensure smooth and effective information sharing. RBI is mulling to enhance the role of these bureaus from a provider of transactional data.
“The real challenge of the information sharing lies in the quality of data that has been shared by the banks. Hence timely reporting or update would be more effective and the effective sharing would definitely help the banks to control stress on bad loans,” said Satish Mehta, founder & CEO, credexpert.co.in.
Courtesy:
Aswathy Varughese l Mumbai
aswathy.rachel@dnaindia.net
Published Date: Dec 21, 2012
http://epaper.dnaindia.com/story.aspx?id=34772&boxid=17654&ed_date=2012-12-21&ed_code=820009&ed_page=15
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