Guidelines on credit policy to be revised

By Our Special Correspondent

NEW DELHI, APRIL 7. Following wide-spread criticism of the loopholes in the banking system leading to the recent securities scam and the crash in the stock market, the Government today decided to unveil new guidelines on banks' exposure to capital markets in the monetary and credit policy to be announced by the Reserve Bank on April 19.

``The RBI is reviewing the existing norms and will announce revised guidelines as part of its monetary and credit policy,'' said the Banking Secretary, Mr. Devi Dayal, after a four-hour meeting of chiefs of public sector banks chaired by the Union Finance Minister, Mr. Yashwant Sinha, here.

``It is unfortunate that some unscrupulous elements have misused the facilities provided by banks,'' said Mr. Devi Dayal. The Finance Minister at the meeting, he said, had advised banks to be cautious and moderate. He also felt the banks needed to tighten their internal supervision mechanism.

Mr. Devi Dayal said the recent scam in Madhavpura Mercantile Cooperative Bank was not due to failure on the part of Bank of India's functioning. In fact, the Bank of India had reported the matter to the CBI when Madhavpura Bank defaulted on payment of Rs. 137 crores.

The meeting was convened to discuss issues relating to non- performing assets (NPAs), formulating new strategies following depletion of the work force after the introduction of VRS in banks and measures to curb banks' exposure in capital markets dominated the deliberations. The Bank of India Chairman had also clarified that none of the bank's officers were arrested by the CBI. However, he admitted that some of them were questioned by the CBI.

Mr. Devi Dayal said the budgetary announcement to disband the Banking Service Recruitment Board (BSRB) would be implemented from July this year after which all the banks would be free to evolve their own recruitment policies. Bank chairmen had welcomed the decision because it would encourage the recruitment of specialised employees in high-tech areas such as information technology. He denied that VRS had affected banking operations and added that the focus was on strengthening customer services in rural and semi-urban areas.

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Section  : National
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