Archive · 7 Sep 2026
Large Corporate Loans Put Indian Banks’ Oversight Under Scrutiny
Indian banks give large loans to big companies and their owners.
Sometimes those companies later struggle to repay the money.
Experts say banks may check borrowers carefully at the beginning but monitor them less closely afterward.
A company’s changing business, debt, cash flow, or operating conditions can create new risks.
Banks may also rely too much on collateral, guarantees, or a promoter’s reputation.
State Bank of India and other lenders have recovered only part of some very large troubled loans.
New rules are intended to make banks recognize possible losses earlier.
The Reserve Bank of India wants banks to use stress tests, warning systems, and technology to find problems sooner.
The main question is whether banks can prevent large loans from becoming bad instead of resolving them afterward.
The resolution of debt linked to Essel Group founder Subhash Chandra has renewed questions about banks’ due diligence and loan monitoring.
Experts say long-standing borrower relationships and promoter reputations can create excessive comfort after loans are sanctioned.
State Bank of India referred 309 large loan accounts totaling Rs 1.5 lakh crore to resolution forums between FY18 and FY26, recovering Rs 49,727 crore.
Indian banks wrote off Rs 9.95 lakh crore in loans to large industries and services between FY15 and FY26, according to RBI data.
The Reserve Bank of India is urging rigorous stress testing, early-warning systems, dynamic provisioning, and greater use of artificial intelligence to detect borrower stress.
- Who
- Indian banks, large corporate borrowers, banking experts, and Reserve Bank of India officials, including Deputy Governor Shirish Chandra Murmu.
- What
- The resolution of Subhash Chandra-linked debt has prompted renewed scrutiny of banks’ underwriting, cash-flow analysis, and ongoing monitoring of large corporate loans.
- When
- The reported data covers periods from FY15 to FY26; the debate follows the latest resolution of debt linked to Subhash Chandra.
- Where
- India’s banking system, including State Bank of India and Bank of Baroda, with troubled loans referred to the National Company Law Tribunal and similar forums.
- Why
- Large corporate loan failures have produced substantial haircuts and write-offs, raising questions about whether lenders identify and manage risks early enough.
Risk Concerns
Banking-System Improvements
Underwriting and monitoring
Risk Concerns
Experts argue that long-standing relationships, promoter reputations, and previous repayment records can create excessive comfort and weaken ongoing scrutiny.
Banking-System Improvements
Banks generally assess financial position, projected cash flows, promoter profiles, collateral, and repayment capacity before sanctioning large loans, while post-crisis rules have strengthened recognition of stress.
Source of repayment
Risk Concerns
Lenders may rely too heavily on sponsor projections, collateral, and guarantees instead of testing whether businesses can generate enough cash under adverse conditions.
Banking-System Improvements
Collateral and promoter guarantees can support lending, while newer frameworks such as expected credit loss are intended to improve upfront risk identification and pricing.
Credit growth
Risk Concerns
Rapid credit expansion can increase asset-quality risks and encourage weaker pricing or underwriting standards as banks compete for borrowers.
Banking-System Improvements
The RBI says banks can manage these risks through stress testing, early-warning systems, dynamic provisioning, and artificial intelligence-based detection.
- State Bank of India resolutions
- Between FY18 and FY26, 309 accounts with combined claims of Rs 1.5 lakh crore were referred to the National Company Law Tribunal and similar forums; Rs 49,727 crore was recovered.
- State Bank of India write-offs
- Between FY17 and FY26, the bank prudentially wrote off Rs 1.52 lakh crore involving borrowers with outstanding dues above Rs 100 crore; recoveries were Rs 20,838 crore.
- Bank of Baroda write-offs
- Between FY21 and FY26, Bank of Baroda technically wrote off Rs 35,715 crore involving borrowers with dues of at least Rs 100 crore; recoveries totaled Rs 9,946 crore.
- System-wide write-offs
- Banks wrote off Rs 9.95 lakh crore in loans to large industries and the services sector between FY15 and FY26, according to RBI data presented in Parliament.
- Key underwriting concern
- Experts identified cash-flow underwriting as a major gap, including insufficient testing of adverse scenarios and excessive reliance on collateral or promoter standing.
- Regulatory response
- The RBI has urged rigorous stress testing, early-warning systems, dynamic provisioning, and greater use of artificial intelligence and machine learning.