In the midst of rising loan defaults by India Inc,banks plan to share information on outstanding loans by companies. In several major cases of loan default where the banks have moved in to examine the books of the company,they have found understated loans. Banks are not obliged at present to share information about outstanding loans on their books with competitors for obvious reasons. But the firewall becomes a problem when sizable loan defaults occur. Companies shop around picking up loans from different banks often hiding their actual exposure to debt. Since each bank depends only on its internal database to access the credit history of a firm while processing loan applications,the game is obviously loaded in favour of the borrowing company. The proposal has been sent to the finance ministry and is expected to be cleared soon as an administrative order for public sector banks. There has to be some consequent changes in acts before the information can be shared among other categories of banks too. It will be an inter bank information exchange system,where banks can check among themselves on loans availed by a company before processing any more such requests by the same entity, said a person close to the development. The move comes at a time when finance minister P Chidambaram has asked banks to act tough on wilful defaulters,to avoid incidents where there is an affluent promoter and a sick company. The finance ministry has also directed banks to identify top defaulters and use all possible legal provisions to recover loans from defaulters rather than go in for a write off. It has also asked the Indian Banks Association to set up an independent body to oversee the corporate debt restructuring mechanism. Banks have also started printing photographs of defaulters under Sarfaesi Act in newspapers,but the present proposal will come a stage before that. Financial institutions including banks,housing finance companies and NBFCs also hare the credit history of retail as well as corporate borrowers with credit information firms such as Cibil. We have over 950 member companies that regularly update our database with credit history of borrowers. This is used by them while evaluating fresh loan applications, said Harshala Chandorkar,senior vice president,communications at Cibil. But this is on a voluntary basis which can be sidestepped by rogue companies. In 2012-13,restructured loans through the CDR mechanism rose nearly doubled to 106 with a total exposure of nearly Rs 76,500 crore. High profile promoters such as liquor baron Vijay Mallya have also been unable to pay back over Rs 7,000 crore of loans for grounded carrier Kingfisher Airlines and its lenders are examining various options to recover the dues. As per finance ministry data,gross non performing assets of public sector banks have more than doubled to Rs 1.55 lakh crore as on December 2012 from Rs 71,080 crore as on March 2011 in which corporate loans account for 53.68 per cent. Of this,about 172 corporate accounts are NPAs of more than Rs 100 crore at the end of December 2012 involving an estimated Rs 37,194 crore. Talking banks * Currently,banks are not obliged to share information about outstanding loans on their books with competitors for obvious reasons. * Taking advantage of this firewall,companies shop around picking up loans from different banks often hiding their actual exposure to debt. * The proposal to have an inter-bank exchange system has been sent to the finance ministry and is expected to be cleared soon as an administrative order for public sector banks * The move comes at a time when finance minister P Chidambaram has asked banks to act tough on wilful defaulters
