Banks must depute agencies for loans above Rs 250 cr

In the aftermath of the PNB scam, the government is set to come up with new rules for big corporate loans.

For now, the public sector banks have been asked to appoint special representatives to monitor status of loans above Rs 250 crore.

Public sector banks have also been asked to restrict the consortium of lenders to a maximum of seven.

Incidentally, only a fortnight before the PNB loan fraud came to light, the government had prepared a detailed action plan for banking reforms and capped the minimum exposure of a state-owned bank in consortium lending at 10%, which means only a few large banks will be able to participate in financing large projects.

The finance ministry has now asked the banks to apply these norms as soon as possible in order to avoid any such fraud in the future.

The ministry is also planning to seek the Bank Board Bureau's opinion on whether a reshuffle in the top echelons of the PNB could help the probe.

Meanwhile, officials privy to the development have said that the ministry has asked the PNB to compensate other banks which have exposure to its loan fraud.

The PNB had earlier agreed to do so once the liabilities are determined.

The PNB will sell some of its non-core assets to repay other lenders to take care of the capital expenditure as well, because the government will not increase its recapitalisation amount any further, sources said.

In another major step to check fraud at public sector banks, they will be asked to make real-time disclosure of loan defaults.

The PNB also has put in place certain corrective measures, including restricting SWIFT user base and putting a limit on the number of SWIFT massages by managers.

SWIFT is a massaging service within banks through which they communicate with one another in a secure manner.

In the case of multi-bank transactions, it is helpful in transmitting instructions to various banks.

The fraud-hit bank has also transferred 1,415 employees, it said in a statement but denied media reports about the reshuffling of 18,000 employees.

Separately, the Institute of Chartered Accountants (ICAI) has sought a list of corporate borrowers from public sector banks with debt of Rs 2,000 crore and above from the Reserve Bank of India.

The ICAI has taken suo motu cognisance of the loan fraud and is looking into whether there has been lapses on the part of auditors.