PROFITABILITY OF BANKS The rate of interest etc. approved should never be lower than what would be applicable for a unit with a one stage lower risk (better) rating than which the unit under consideration is earning. In all cases of concessions proposed, a note on the cost- benefit analysis of concessions granted should be made mandatorily a part of the sanction note. We may come up with a Paper on the “Rational and Policy on Concessions in ROI and other Charges to Large Corporate.”

While discussing bank’s profitability, another issue which needs addressing is the grant of concessions in the interest rates, commission and fees to corporate. It is my experience that there is no laid down policy in most banks on grant of concessions. These are based mostly on the negotiating capabilities of the borrowers. In the race for business growth, banks tend to out-bid each other on concessions, which tendency is played upon by the applicant borrowers to their benefit.

Promoters Margin is very important. While accepting the promoter’s commitment for additional margin, the source should invariably be understood by the bank. The source of promoter’s margin should be supported by the documents. In case the promoters want to bring additional funds through sale of some of their personal/companies properties, the same properties should be kept by the bank as security, till the same are sold out and the funds are inducted into the business.

Promoters Margin is very important. While accepting the promoter’s commitment for additional margin, the source should invariably be understood by the bank. The source of promoter’s margin should be supported by the documents. In case the promoters want to bring additional funds through sale of some of their personal/companies properties, the same properties should be kept by the bank as security, till the same are sold out and the funds are inducted into the business.

Promoters Margin is very important. While accepting the promoter’s commitment for additional margin, the source should invariably be understood by the bank. The source of promoter’s margin should be supported by the documents. In case the promoters want to bring additional funds through sale of some of their personal/companies properties, the same properties should be kept by the bank as security, till the same are sold out and the funds are inducted into the business.

Promoters Margin is very important. While accepting the promoter’s commitment for additional margin, the source should invariably be understood by the bank. The source of promoter’s margin should be supported by the documents. In case the promoters want to bring additional funds through sale of some of their personal/companies properties, the same properties should be kept by the bank as security, till the same are sold out and the funds are inducted into the business.

I understand that some bank are sanctioning and disbursing very large value loans without understanding the end use of the same. These loans may be in the name of Mortgage Loan/ LAP etc. However, these funds can only be used either for the purpose of Ever-greening of bad loans or for the purpose other than the business purposes.No loan should be sanctioned by the banks without understanding the end use. Monitoring of end use is very important.

Cases where the account has become NPA and banks have sufficient reasons to belief that the reason of NPA is diversion of funds, should be immediately classified as wilful defaulters. In these types of accounts, no restructuring should be allowed.

To control DIVERSION OF FUNDS A special audit at the end of every month is required to be done by the bank, either internally or through outside agency, regarding conduct and transaction in the bank account. A detailed scrutiny of the bank account can through light on the diversion of funds on a real time basis than at a time when account goes bad. It is more important in today’s scenario of CTS.

To Control DIVERSION OF FUNDS Disbursement of term loan especially towards Plant & Machinery should be strictly as per the suppliers approved at the time of sanction, except with the approval of sanctioning authority.