Even as more banks prefer consortium lending, which improves access to information, the Reserve Bank of India (RBI) on Tuesday made information sharing among banks compulsory, with effect from 2013. In consortium lending, two or more banks come together to finance big projects that require huge amount of money.
“NPAs (non-performing assets) and restructured loans of banks have been increasing significantly. A major reason for deterioration in the asset quality of banks is the lack of effective information sharing among them, despite specific instructions issued in September and December 2008 regarding sharing of information on credit, derivatives and unhedged foreign currency exposure,” the central bank said in its second quarter review of monetary policy.
RBI said the banks should strictly adhere to the instructions regarding sharing of information relating to credit among themselves, and put in place an effective mechanism for information sharing by December 2012. The central bank warned that banks would face action, including penalties, if they did not adhere to the norms.
“Any sanction of fresh loans/ad hoc loans/renewal of loans to new/existing borrowers with effect from January 1, 2013 should be done only after obtaining/sharing necessary information,” said the central bank.
Bankers welcomed the move and called for effective use of credit bureaus in the country for the purpose.
Pratip Chaudhuri, chairman of the State Bank of India, said: “Currently, there are four organisations (credit bureaus). They should be fully utilised.” According to him, banks do share credit information and there is a mechanism in place. But the issue is, “how to make it more dynamic and contemporary”, he said.
Shikha Sharma, managing director and CEO of Axis Bank, said: “The discussion with RBI was around sharing of information and if we (banks) have adequate systems for sharing of information on loans that are given by different banks.”
RBI said it would issue detailed guidelines separately.
