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This article is more than 2 year old.

Corporate Affairs Ministry raises a red flag over banks’ improper loan disbursements

Corporate Affairs Ministry raises a red flag over banks’ improper loan disbursements
In a bid to curb improper loan disbursements which might lead to a sudden spike in non-performing assets of banks in future, the Ministry of Corporate Affairs (MCA) has raised concerns over the role of bankers and sought tighter regulatory oversight.
Sources told CNBCTV18 that the MCA has raised a red flag to the Finance Ministry over the role of bankers in loan disbursement. “The MCA has approached the Finance Ministry urging tighter regulatory oversight on bankers,” the sources said.
The MCA had done an internal analysis of cases which are under the Insolvency and Bankruptcy Code (IBC) process. As per the analysis, the MCA has found “irregular transactions of over Rs 1 lakh crore in 215 companies where corporate insolvency resolution processes is going under the IBC process.”
MCA also said that “bankers have been negligent in the past while disbursing loans and monitoring the end use. These irregular transactions could have been avoided if bankers had adhered to strong risk management norms and monitored the end utilisation of loans,” the sources pointed out.
The irregular transactions include fund diversions, dealings with shell companies, among others.
MCA has urged the Finance Ministry to ensure that banks follow stronger risk management norms, vigilant loan administration and careful monitoring of end utilisation of sanctioned loans.
According to the IBC report card, 53 percent of corporate insolvency processes have been completed in the January-March quarter of FY 2019. As many as 359 cases had been admitted for corporate insolvency, while only 14 got resolution plan approvals and 73 went into liquidation in the January-March quarter.
 
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