Reserve Bank of India tightens connected lending norms
The regulator has also decided to come out with a unified regulatory framework on connected lending for all the regulated entities to avoid gaps in regulation.
«The extant guidelines on connected lending are limited in scope and are not applicable uniformly to all regulated entities,» RBI Governor Shaktikanta Das said Friday, while announcing the monetary policy.
Connected lending or lending to persons who are in a position to control or influence the decision of a lender can be of concern, if the lender does not maintain an arm’s length relationship with such borrowers.
Such lending can involve moral hazard leading to compromise in pricing and credit management, RBI said.
It may be noted that ICICI Bank chief executive Chanda Kochhar had to step down in 2018 for charges of favouring Videocon Group for the loan.
