The Industry Ministry wants laws establishing a new SME bank to explicitly protect lending officers from legal liability if assets turn bad. Exempting employees from normal regulations governing workers at state agencies would speed up lending to small and medium-enterprises, which typically involve relatively higher credit risks than other customer groups.
The Small Industry Finance Corporation, which will serve as the base for the new SME bank, has non-performing loans totalling about 30% of its portfolio, well above the average 18% posted for the banking sector.
But Finance Ministry officials express concern that a clear exemption could lead the new bank to extend loans without due care and analysis as personal accountability for loan officers is lessened.
One possible compromise would be to define loan categories extended to support state policy as warranting special treatment.
