RBI may limit size of lender consortium

RBI may limit size of lender consortium

FPJ BureauUpdated: Friday, May 31, 2019, 10:29 PM IST
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Mumbai : With growing concerns over bad loans, the Reserve Bank of India is looking at the possibility of limiting the number of lenders in a consortium for better oversight of credit, Deputy Governor R Gandhi said.

Banks lend to large projects in a consortium, which is generally led by the one with the maximum exposure to the account. There have been cases of number of lenders in a single consortium going up to 18. “If too many (consortium) members are there, credit monitoring becomes a problem. So that’s why there have been suggestions to limit the number of members in a consortium,” Gandhi said at an non-performing assets management summit.

Typically, banks prefer sanctioning big-ticket corporate loan in consortium format to diversify their risk emanating out of large exposure.He was quick to point out that there are multiple sides to such a demand which need to be assessed.

“There is the other side of the story also because there has to be freedom for borrowers and banks to decide commercially whether they want to be in a consortium or not. Or why should there be a regulatory constraint, that’s a counterside of the suggestion,” he said.

He said there is also a suggestion to form a cell for stressed assets resolution, on the lines of the corporate debt restructuring cell. On the issue of asset quality stress, he said RBI is also seeking to amend certain sections of Securitisation and Reconstruction of Financial

Assets and Enforcement of Security Interest

(SARFAESI) Act, 2002.

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