Top
Millennium Post

Tighten monitoring to check fund diversion: FinMin to RBI

Against the backdrop of Kingfisher case, the Finance Ministry has asked the Reserve Bank to tighten lending norms to prevent borrowers from opening multiple current account outside their consortium banks.

There are a few instances where defaulting borrowers indulge in diversion of funds by opening multiple current account outside the members of the consortium, sources said. Therefore, sources said, the Finance Ministry has urged RBI to tighten the norms and monitoring system so that such activities could be prevented.

According to sources, Kingfisher Airlines allegedly diverted funds by opening a current account in HDFC Bank and had a balance of Rs 7.5 crore as on date.

This fact was not known to the consortium of lender headed by State Bank of India. These banks have an outstanding debt of Rs 6,521 crore from the now-grounded carrier. Such diversion can be monitored by Reserve Bank as it is sector regulator and there is need to strengthen the monitoring mechanism, sources said.

There has been a spate of defaults taking place in banking system. Majority of them are due to slow economic growth but there is small proportion of cases where defaults are intentional.

Recently, the Finance Ministry had ordered limited forensic audit into some non-performing accounts of Kolkata- based UCO Bank to find out whether there were any irregularities
in sanction of loans.

Next Story
Share it