Interestingly, Central Banks decision comes at a time when most of the commercial banks are going on full steam to tap this segment by delegating powers to lower rung officials. The banks decision was triggered by some fraudulent deals in some of its north Indian branches.
Senior bank officials told FE that Central Bank had taken a policy decision, sometime in August 2001, to withdraw personal loan sanctioning powers from the regional managers and assistant general managers.
The decision was taken basically to have a check on disbursement of personal loans. There were a series of complaints that regional managers in the Northern states were misusing their powers while sanctioning personal loans to individuals. Subsequently, from October 2001 instructions were sent to regional offices asking them to forward all proposals of personal loan to individuals to the zonal offices for processing. However, the instructions became operational at the branch level only recently, officials said.
Earlier, assistant general managers and regional managers of the bank were given powers to sanction personal loans up to Rs one lakh per individual and Rs 50,000 per individual respectively, they added.
This move of the management has hit the credit offtake under the personal loan segment considerably. The reduction in disbursements is as high as 90 per cent, says a branch manager. Prior to these restrictions, the personal loan disbursements, on an average, was used to issue personal loans close to about Rs five lakh to Rs six lakh per branch. But now it has dropped by about 90 per cent. We are losing customers as the processing time now involved is more, though our interest rates are highly competitive. It takes close to about a month for obtaining personal loan as against the earlier processing time of two days, he said. The delay is because all the proposals forwarded by the branches and regional offices has to be processed only at the zonal offices, he added.
All the regional managers and branch managers have made a representation to the management to delegate more powers to facilitate easy disbursal of loans.