Branch-level officials of state-run banks are under enormous pressure from seniors to boost loan growth, following a government diktat at a time when demand for credit, particularly from quality borrowers, has all but disappeared.
Many state-run banks have put a stop to loans for borrowers with doubtful repayment capacity, but pressure from top executives to boost disbursals have put officials at bank branches in an unenviable position, two people directly aware of the matter said on condition of anonymity.
Pressure to disburse loans to help companies tide over the situation caused by covid-19 has been building for a while and has escalated after banks received a notification from the department of financial services on 16 April specifying deadlines for disbursals and guidelines on reaching out to borrowers. Mint has reviewed a copy of the notification.
The finance ministry has been seeking daily updates from banks about covid-19 credit lines and reassessment of borrowers’ working capital limits, said the two people mentioned above. “The senior management is seeking status reports from zonal managers, who, in turn, are pressuring branch managers without understanding field-level constraints," said the first person. Most people seeking emergency credit lines have not been repaying regularly and giving them fresh loans would be difficult, this person said. The demand for credit was low “except for some who require it to pay salaries", said the second person.
The 16 April circular said, “In the context of resumption of business activities from 20 April, timely origination, sanction and disbursement of fund-based and non fund-based credit is critical for revival of economic activity. Therefore, banks are advised to place in the public domain their time-bound outreach and processing plans with clear step-wise timeframes and communicate clear responsibilities and timeframes to all levels for securing sourcing of loan requests and their appraisal, sanction, documentation and disbursement."
The covid-19 emergency credit line is to be processed and disbursed between three to six working days, it said. Working capital reassessment up to ₹5 crore and above ₹5 crore must be disbursed within six to nine and 12-15 working days, respectively, it said.
Click here to read the Mint ePaper Livemint.com is now on Telegram. Join Livemint channel in your Telegram and stay updated
