RBI urges banks to keep an eye on utilization of loans

The Reserve Bank of India has outlined certain flaws in keeping a follow up of the lent money to the borrowers by some banks. The Central Bank said that some banks are not keeping a proper follow up of where the lent money is being utilized.

According to the central bank some of the banks blindly follow the Chartered Accountants reports and do not keep proper check of the work on their own.

The Central Bank said "In the context of the above, it is advised that the efficacy of the existing machinery in your bank for post-sanction supervision and follow-up of advances may please be evaluated and made robust, wherever considered necessary,"

The improper utilization of the lent money adds to the bad debt of the bank and thus deteriorates the performance of the bank. The Central Bank urged the banks to discontinue such practices and to keep a proper record of books of the account of the borrower.