Apropos the editorial "Bad loans and worse" (August 11), it is less known that in public sector banks (PSBs) sanctioning loans has been delegated by the boards to managing and executive committees, in which only some directors participate. Given the recent controversies, there is a need to ensure that big-ticket loans are sanctioned by the boards of the banks only. The credit appraisal system can also be improved if appraisal teams are organised around industrial segments rather than geographies as is still the practice in many PSBs, leading to non-specialist industry credit officers. Why should each bank finance every industrial segment? Banks should declare the industry segments to which they will lend based on available expertise. For other industries, they may participate in loan syndications, piggybacking on the appraisal of institutions such as the State Bank Of India or IDFC. The suggestion that all cases in which loans were made contrary to internal assessment should be reviewed. Damage control will not help since identifying these will put all existing loans to review.
Y P Issar Karnal
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