MUMBAI, April 9: The panel set up by the Indian Banks' Association (IBA) has suggested to the Narasimham committee on banking-sector reforms that the priority-sector lending limit of 40 per cent of the net-bank credit must be cut to 10 per cent.It has also suggested redifining the sector. Besides, it has called for the setting up of a debt-recovery tribunal for small loans and legal support for asset recovery. "Section 29 of the State Financial Corporation Act empowers corporations to take over assets in case of defaults. Banks should be given similar powers," said a source. The panel is against the 40 per cent stipulation primarily on three counts:
* operating expenses for small loans are high owing to the deployment of a large field staff
* the recovery process is low in agriculture and the small-scale sector and the asset quality is bad as there are many risk factors.
"The lendings should be restricted to only the core sector. Other loans should be left to the banks' judgement. We should beinvolved in the selection process of beneficiaries in government-sponsored schemes," a senior banker said.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
