Mumbai: Apart from banks and borrowers, the government and judiciary too had a role to play in India’s bad loan crisis, State Bank of India (SBI) chairman Rajnish Kumar said.

Speaking at industry body Ficci’s banking conference Fibac on Monday, Kumar said while many people ask him, who is responsible for the current pile of non-performing assets (NPAs), it’s not so simple to answer. He said delayed response by bankers has also contributed towards the aggravated NPA situation.

“I would say everybody is responsible, be it the bankers, be it the industry or borrowers, be it the government and without inviting contempt of the court, even the judiciary has played a role in this situation," he said.

Kumar said that somebody who invested in a business in 1996 based on an assurance on availability of coal by the government, could not have predicted that after 20 years, coal block allocations will get cancelled and their entire investment will be jeopardized. He was referring to the Supreme Court’s judgement in 2014 which cancelled allocation of 214 coal mines awarded between 1993 and 2010.

He said that although some of the sectors are showing signs of a turnaround, the power sector is still under great stress. “The hope is much less in the power sector. There is need, definitely, to fix the power sector for continued growth of the economy," he said.

Meanwhile, he said there are certain problems around the consortium lending process and multiple banking systems. “Up to mid-90s, it used to be consortium banking and later on, because there was a complaint from the industry that it is delaying the process, we went into multiple banking, but that has not resulted into any faster decision-making and it has led to more problems," he said.

He suggested limiting the size of the consortium, as it does not make sense to have too many banks for small loans.

“We will definitely reorganize many consortia. That kind of exercise we are looking at. Up to 500 crore, I don’t do consortium lending anyway. I can take over (some loans), I can exit (from other consortia)," he said.

Kumar also raised doubts whether the genuine equity was available in businesses by borrowers and whether borrowers had put enough equity in their businesses. “Wherever I have seen that the equity was available, those enterprises have been able to manage the assets; (in case of) anyone who was just playing on the bank’s money and (therefore) how much interest and stake they had in the business is again a subject matter of debate," he added.

He said that going forward, with the learnings from the past, it is very important that banks, while evaluating any financing proposal, have to ensure that the promised equity is available in the business.

“The second issue has been around whether the funds given by the banks have been used for the purpose for which they were meant to. Again, the enterprises where the money have been used for the purpose for which the borrowing was made are in much better position," he added.

Kumar explained that banks do not have mindset of the Central Bureau of Investigation (CBI) or the Enforcement Directorate (ED) and lend the money on trust, apart from paperwork.

“There have been several cases with clear breach of that trust. Now, we will trust, but we will verify; probably that verification factor was missing," he said.

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