Fresh accretion of bad loans moderated in the fiscal first quarter: SS Mundra

Mumbai, Aug 17 (KNN) Fresh accretion of bad loans moderated in the fiscal first quarter, with most banks performing better in loan recovery, Reserve Bank of India deputy governor S.S. Mundra has said.

Referring to an investment advisory report by an unnamed third party, he said in April-June, the level of bad loans arising out of restructured assets also dropped.

“The fresh addition may not be happening from the corporate lending side but from MSME (micro small and medium enterprises), which is what the report is saying. We will have to verify this claim. If that is the trend, there will be obviously some concern about it,” Mundra said.

While the banking sector as a whole seems to have performed well on loan recovery, some individual banks diverged, Mundra said.

Giving a stern message to banks, Mundra said the Reserve Bank is "deeply concerned" about mis-selling of insurance products, warning that it may press for making penal provisions more stringent to deal with the problem.

"There is one area in customer service where we're getting deeply concerned. This is around mis-selling, particularly of third-party (insurance) products. Everyday, we keep on hearing numerous instances where such practices are going on," Mundra said.

"Mis-selling is one area which should concern us very deeply and if we don't feel a perceptible improvement and we see that the instances are continuing to come out, I think the consequences can be very serious, which can be variety of ways, including financial penalties," Mundra said.

He said ideally, this should get the attention of the top bank management and should not be seen merely as a compliance exercise. "You have to ensure that customers coming to you are getting a fair deal and they're not misled by the staff at dealing level," he said.

Mundra also raised concerns over bank staff themselves being fully financially literate.