With public sector banks showing a marked increase in bad loans, the Finance Ministry has asked these banks to diligently conduct quarterly inspection of units/enterprises jointly financed by them.
This instruction is aimed at ensuring that the banks take corrective action to prevent slippages (deterioration in asset/loan quality) should they find anything amiss during the inspection. The inspection conducted by banks, among others, entails audit of stocks/inventory and receivables; verification of stocks and debtors; and verification of collateral.
Banks undertake inspection to ensure that the money they lent is being used only for the intended (productive) purpose and not diverted to unrelated activities/businesses, said a senior public sector bank official.
The utility of the inspection exercise also lies in the fact that it can pinpoint improper credit appraisal and failure to exercise proper post-disbursement supervision.
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