Protect bankers’ interest for free flow of credit to small firms: Seshagiri Rao

Banks and their employees are reluctant to extend loans to India Inc unless and until they are given adequate protection from penal action if the loan turns bad at a later stage.

Most of the sections of economy are deprived of various concessions extended by the government and the RBI, as bankers have turned extra cautious and are not sanctioning loans to certain sectors which they perceive as risky.

Seshagiri Rao, Joint Managing Director, JSW Steel, told BusinessLine that whenever the company interacts with customers and trade channels, the general complaint is that they are not getting enough credit.

In fact, he said the banks’ credit to commercial sector has come down by ₹1.33 lakh crore between April and May, at a time when they are in fact supposed to support the industry.

While the government has announced a series of measures to push up credit to the industry, the flow has been coming down instead of going up, compared to before the Covid crisis, he said.

Most of the industries are dependent on banks for their working capital, and it is very important that credit flows into these companies to bring them back normalcy, said Rao.

To ensure that loans are disbursed to MSME sector, the government had to step in as guarantor for the loan.

While this move is a bold step, Rao said the interest of bank staff needs to be protected from what is seen in the case of Nirav Modi or Bhushan Steel.

More than 800-900 bank officers are still being called regularly to the offices of investigating agencies such as the CBI and the ED. Bank officers are reluctant now to take any decision, as their move today in good faith can be questioned at a later stage, he said.

While the case involving fraud by fugitive diamantaire Nirav Modi is well known, the Serious Fraud Investigation Office is investigating how Bhushan Steel promoters Neeraj Singhal and Brij Bhushan raised loans fraudulently through a web of over 60 companies. The investigation is still going on, even after the company was taken over by Tata Steel through an insolvency driven process and renamed as Tata Steel BSL.