Raghuram Rajan wants individual bankers to focus on large loans

Raghuram Rajan, governor of Reserve Bank of India, has expressed concern over individual banks abandoning huge project loans while trying to cater to retail customers, and that too when India needs huge infrastructure financing. "It seems today that, having abandoned project loans, every bank is targeting the retail customer.

Rajan was speaking at a banking conclave organized by industry body FICCI, and added that India has a huge pipeline of project financing, and banks, unwilling to take risk today, need to focus on these projects.

"Even though bankers are very risk averse today, and few projects are coming up for financing, this will change soon," Rajan said. "Bankers will remember the period of irrational exuberance in 2007-2008 when they lent without asking too many questions. I am hopeful that this time will be different."

Indian banks are facing bad debts of nearly Rs 6 lakh crore, owing largely to infrastructure sector. Rajan said that banks can lower down risks associated with infrastructure lending with due attention.

"Significantly more in-house expertise can be brought to project evaluation, including understanding demand projections for the project's output, likely competition, and the expertise and reliability of the promoter," he said. "Bankers will have to develop industry knowledge in key areas since consultants can be biased."

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