Principal Secretary to PM cautions banks against lending euphoria, urges focus on project viability

Principal Secretary to the Prime Minister P.K. Mishra on Wednesday cautioned banks against reviving aggressive lending practices driven by short-term optimism, warning that poor credit assessment in the past had forced the banking system to divert significant resources towards cleaning up stressed assets.

“The cleanup of the banking system required considerable resources and time. Those resources could otherwise have supported productive investment. We should therefore preserve the institutional memory of that episode,” Mr. Mishra said while addressing the SBI Banking and Economics Conclave in Mumbai.

“Credit must be appraised against the economics of the project rather than the enthusiasm of the moment. That is the surest protection against a repetition of the cycle of excessive lending, stressed assets and subsequent cleanup,” he added.