In an effort to improve financial oversight, banks are planning to increase the scrutiny of loans worth over ₹250 crore. This change will focus on improving the follow-up process after loans are approved, according to sources familiar with the matter.
As part of ongoing reforms, state-run banks will renew the involvement of Agencies for Specialised Monitoring (ASMs), particularly in cases where multiple banks are involved in lending, such as consortium lending. This approach will cover loans with large or specialized credit exposures. The next phase of this reform will include a comprehensive review to evaluate how well the current ASM system is working.
One executive involved in the process, who asked not to be named, said, “These changes will strengthen the risk management processes that are already in place and ensure stricter monitoring of loans after they have been approved. Banks will be able to spot warning signs earlier, especially cases of fund diversion, and take the necessary actions when needed.”
What Are the Key Changes?
Under the EASE Reforms Agenda (Enhanced Access and Service Excellence), public sector banks have started to clearly separate the roles involved in large loans. This means that pre-loan approval and post-loan sanction tasks will now be managed differently. In addition, banks will appoint ASMs to monitor loans over ₹250 crore.
According to the sources, this move aligns with the government’s strategy for early recognition and resolution of financial risks. The aim is to promote responsible lending, ensure that credit reaches the right borrowers, and reduce the accumulation of stressed assets in the future.
How Will the Monitoring Process Be Enhanced?
To further improve the monitoring of large loans, the Indian Banks’ Association (IBA) is overseeing the renewal and appointment of ASMs until 2028. In cases where the loan is related to specialized sectors, ASMs may be involved from the post-sanction stage until the loan is fully repaid or the project is completed, depending on the bank’s requirements.
Additionally, public sector banks are working on setting up a common portal for consortium lending under the EASE 8.0 reforms. This will also include a shared collections system and a better way to handle the recovery of bad loans. This initiative is part of the government’s effort to improve collaboration among banks and boost overall business outcomes.
Impact of the Reforms
The steps taken under the EASE reforms seem to be having a positive effect. In the first nine months of FY25, public sector banks saw a 31% increase in net profits compared to the previous year, reaching a record ₹129,426 crore. Despite the growth in profits, the net non-performing assets (NPAs) remained at ₹61,252 crore, showing the need for continued efforts in managing large loans and minimizing financial risks.
