The Reserve Bank of India (RBI) on Monday cracked the whip on banks for delays in credit disbursal, resulting in tardy implementation of projects. The central bank advised lenders to delineate the procedure for disposal of loan proposals with appropriate time lines and institute a suitable monitoring mechanism for reviewing applications pending beyond the specified period.
“It has been brought to our notice that there have been inordinate delays on part of banks in conveying their credit decisions, leading to delays in project implementation. While banks are required to carry out necessary due diligence before arriving at credit decisions, timely and adequate availability of credit is a pre-requisite for successful implementation of large projects,” the RBI said in its notification.The RBI said banks must put in place the above system within 30 days of receiving the circular. But, the RBI reiterated that there should not be any compromise on due-diligence requirements. “Banks may also make suitable disclosures on the timelines for conveying credit decisions through their websites, notice boards, product literature, etc,” the notification said.
Canara Bank CMD RK Dubey said the move would not only keep customer on their toes, but also push banks to cut procedural delays. “We will look into the proposal and allot specific timelines,” he said. Animesh Chauhan, executive director at Central Bank of India, said there are already guidelines and time-frames set for small loan proposals to be disposed. “Internal guidelines are there. But, however a more centralised system as suggested by the RBI will help,” Chauhan said.
The RBI, under its Guidelines on Fair Practices Code for Lenders, stipulated that the time-frame within which loan applications up to Rs 2 lakh will be disposed of should be indicated at the time of acceptance of loan applications.