Consortium lending: SBI chief Rajnish Kumar says banks should review models

SBI Chairman Rajnish Kumar. (Photo: Nirmal Harindran/File)

State Bank of India (SBI) Chairman Rajnish Kumar on Monday said the banking sector should put in order and relook the consortium lending and multiple banking models as they are increasing the risks and leading to delays in decision banking.

“We thought that consortium banking reduces the risk But now I am more and more reaching to the conclusion that it is increasing the risk because of the delayed decision. Like, if I want to give money, then I have to take NOC (no objection certificate) from 28 bankers, then how do I expedite my decision. I’m not saying that delays are not happening in my bank, but what I am saying is there are certain problems around the consortium and multiple banking. We need to put in order and relook at this consortium or multiple bank model,” Kumar said while speaking at Ficci-IBA banking conference (Fibac).

According to Kumar, till md-90s, it was consortium banking model. Later, as there was a complaint from the industry that it is delaying the process, we went into the multiple banking, but that has not resulted in faster decision-making and it has led to more problems, he said.

Banks had recently agreed to adopt an inter-creditor agreement for consortium lending, under which the lead bank will be entrusted with the job of preparing a time-bound resolution plan for mid-sized bad loans. The agreement calls for a consensus among at least 66 per cent of creditors for a resolution plan for bad assets worth between Rs 50 crore and Rs 500 crore to be approved.