Bankers should take onus for large loans: Rajan

Mumbai, August 16 

RBI Governor Raghuram Rajan today said there is a need to shift loan sanctioning process from the present committee-based approach to single banker taking up the responsibility as well as rewarding the person if the project goes on well.

Addressing the annual bankers’ conference, Rajan said, “Even while committees may take the final loan decision, some senior banker ought to put her name on the proposal, taking responsibility for recommending the loan.” 

Addressing bankers’ body IBA and Ficci-organised banking summit, Rajan said technology can go a long way in helping arrive at a better due diligence.

Currently, large loans are sanctioned by a loan approval committee and no individual banker is held responsible if the loan goes kaput.

In a strong pitch for phasing out the government role in top-level appointments at public sector banks, Rajan suggested empowering their Boards to take all major governance decisions freely without having multiple “constituencies to satisfy”.

Suggesting a major reduction in government and regulatory oversight of public sector banks (PSBs), including by RBI itself, the outgoing Governor also proposed withdrawing the central bank nominees from their Boards.

“With so many overlapping constituencies to satisfy, it is a wonder that bank management has time to devote to the management of the bank,” he said. PTI