The CBI last week registered a case against some fraudulent account holders and unknown bank officials in a public sector bank, the nexus of which is alleged to siphon off black money worth over Rs.6,000 crore overseas. The federal investigation agency also raided residences and offices of a business tycoon to whom credit of Rs 900 crore was allegedly given violating norms. At a time when most of our public sector banks are reeling under high NPAs and seeking help from the Centre, these allegations naturally raise concern.

Meanwhile, a top central government bureaucrat has raised another issue. He told the media that some banks are "happily over financing" a large number of roads and highways projects without necessary due diligence. Some of the developers are even using the released money in other sectors, delaying the projects. According to a recent study, a number of under-construction road projects, with a total sanctioned debt of nearly Rs. 46,000 crore, are at a high risk of not being completed. This is alarming, and I think we urgently need new policies to prevent the banking system from rotting further.

In case of small business lending the story is quite different, however. They are neglected for no reason and hardly given a chance to prove their ability. It is true that lending to SMEs is riskier, but it is a frequent complaint among small entrepreneurs that their loan applications are rejected by banks without any valid reasons and in the pretext of going by the book. Many a time, bank managers do not even bother to respond to their loan queries. It is said, they often pretend ignorance about the government loan schemes designed for SMEs. Such complaints are a dime a dozen.

I don't believe that every banker in the country nurtures some sinister motives against small businesses, but it is equally true that over the years a false notion has been created among many of them that small businesses are bound to fail or default on their loans. There is a big trust gap, to bridge which the small business lending system must be revamped. Transparency in lending norms, clear-cut methods to evaluate and monitor SMEs' financial condition, guidance to them in loan application, etc. are some steps that I think need to be urgently taken.

I invite your opinions.