IBA to draft framework to address consortium, bring solution to lending concerns

The Indian Banks’ Association (IBA), headed by SBI Chairman Rajnish Kumar, will soon come out with a framework around April in a bid to address issues pertaining with consortium lending to industry and finding a solution for alternate sources of borrowing for them.

SBI Chairman Rajnish Kumar

Industry is facing problem, particularly in consortium and multiple lending and even if a small NOC (no objection certificate) is required, the borrower has to keep going around the banks, so the process stretches the funding clearance from six months or one year or even one-and-a-half years, Kumar said at an industry event.

“And the NOC may come or may not come and all your (industry borrower) plan goes for a toss. So there has to be a system in the decision making where these decisions can be taken on time,” he said.

And to offer solution to these issues, IBA level and Reserve Bank of India are developing secondary market for loan to corporates.

“I have decided to set up a working group that will examine all these issues around consortium and multiple banking lending and see to it that standardisation happens and it becomes hassle free as far as the borrowers are concerned,” Kumar said.

“We will try to make an arrangement that if there are some dissenting lenders, how we can give them exit (from consortium of lenders), all these issues will be deliberated.

So that is a step you will see next three months or at least from April, IBA should be able to come out with a framework,” said the SBI Chairman while addressing concerns of the industry regarding borrowing.

He said that the committee will include six members with representatives from public, private and foreign banks.

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