New Delhi, Apr 12 (KNN) Vice President of India instructed banks to maintain strict vigilance during pre and post-sanction procedures of loans and told them to never make compromises in the due diligence processes.

Addressing the gathering at the celebration of the 125th Foundation Day of the Punjab National Bank (PNB), here, Vice President, M. Venkaiah Naidu said “Banks must constantly strengthen their internal processes to effectively monitor funds and maintain strict discipline in lending.”

He suggested that banks can make use of technology and data analytics to identify the early warning signals of loan defaulting and evolve robust mechanisms to identify the hidden NPAs.

He said that banks must focus on nurturing internal skills for credit assessment and undertake forensic audits to understand the intent of the borrower.

Expressing concern about the increasing cases of wilful defaults and frauds that have recently been in the news, Naidu said that no efforts in bringing these individuals and entities to speedy and exemplary justice.

He opined that India must enter into more treaties for the exchange of information and intelligence on financial fraud and bank accounts and work with international agencies in bringing defaulters to justice.

Besides this, he questioned the need for the existence of tax havens and said that India must enter into many more strong extradition treaties.

The Vice President also asked banks to adhere strictly to the principles of business ethics and good corporate governance at all times.

Saying that this was a period of disruptions in the banking sector caused due to factors ranging from technology to innovative new business models, he urged banks to make bold moves and initiate major transformations to take advantage of them.

The Vice President pointed towards a number of challenges being faced by the banking industry such as the rising Non Performing Assets in the banking system that has the capacity to affect banks' lending capabilities.

He said that the accumulation of bad loans happened over a long period of time, and now, it threatens to hamper economic growth by weakening the credit supply channel of the economy.