How banks price loans needs to change, and RBI’s nudge is welcome

..... At a time when banks stare at mounting bad loans, RBI wants to put in place a risk practice of global standard. Gross non-performing assets of public sector banks shot up by Rs 47,000 crore to Rs 1,84,193 crore in December 2012 from Rs 1,37,102 crore in March that year. There cannot be any second opinion on customers with the same risk profile getting similar treatment in loan pricing. But despite several reminders from RBI, most banks have continued to blatantly favour some customers and discriminate against others for reasons never adequately explained because of the opaque way loan pricing is done. In its regular quarterly inspections, RBI has started asking banks to justify the pricing of certain loans......

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