The premier bank of India – the State Bank of India #SBI has recently made a change in its lending policy – they have moved from Balance sheet Based Funding to Cash-flow based lending. A move, that should have happened long time back.

It might have got prompted more because of the recent merger of major subsidiaries into its fold (major banks merging in main SBI). Loads of Borrowers who had resorted to double funding and/or Off-Balance-sheet finance from SBI as well as its’ subsidiaries – hitherto unknown, have been exposed. Such borrowers were sitting on a time-bomb waiting to explode. The merger was the tipping point. The question is – why does it take so much time for the banking industry (particularly the PSU lot) to understand such inefficiencies in the system. This delay has caused massive Non-performing Assets, which are only becoming larger by the day.

One never knows if this problem has been addressed – as lot of Banks still adopt the same age-old system of corporate lending and till such mergers don’t happen – the borrowers (ones who haven’t been caught as yet) are merrily enjoying….