Retail loan is not a nirvana: Mundra to bankers

Former RBI deputy governor SS Mundra on Thursday expressed serious concerns over banks increasingly shifting their focus to retail loans from corporate loans and warned bankers that retail loan is not a “nirvana”.

“If every banker is searching a nirvana in retail loans then I think a word of caution is needed,” Mundra said at an Assocham event in Mumbai on Thursday.

Mundra said the trend has now changed from what was earlier two-thirds of the lending book had corporate loans while one-third was retail loans.

“Today, it is reversed, with one-third is corporate book and two-thirds are retail book. Though this is a shift which has taken internationally, our system is still a work in progress in this regard,” Mundra said.

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Urging timely recognition of bad loan problem both by banks and borrowers, Mundra said, “For bankers and borrowers postponing of the bad loan problem is not a good idea”.

He said that one must take note of the first sign of asset quality problem and it “would be a good idea” that stress in any account should be recognised and both the sides sit together and find right solution.

“It would be important for all lenders to acknowledge and appreciate the fact that NPAs are the reality of a business cycle. An account becoming NPA is not a sin and no one should be afraid in telling that the account is tagged an NPA,” Mundra added.