Board room tongpats: State-owned bank adopts tougher collateral policy on loans in the guise of squeezing out up to 5% grease money from long-time clients

Contractors and exporters, who are long-time clients of a state-owned bank (SOB) are being milked dry by a new racket adopted by this lender’s scheming directors.

A Babbler said SOB’s clients were surprised after they were asked to provide full collateral on their loan applications instead of the SOB’s previous policy of requiring only a valid government contract or purchase order for loan releases.

Babbler said borrowers, whose loan applications have been stalled due to this unusual demand for full collateral, can opt to fork out three percent to five percent of the loan amount to unscrupulous members of the board, which has the final say on which loans get approved.

“It has been an established practice by international banks no less, to allow for minimum collaterals for as long as the receivables/proceeds from the use of the loan are immediately deposited to the bank,” Babbler said.

“This practice is not only failsafe, but also promotes growth and development as it allows the borrowers to optimize their assets to their business,” Babbler added.

Babbler said if the borrowers give in to the demands of SOB’s unscrupulous directors, they would be better off borrowing from commercial banks.

“In the first place, contractors and exporters choose to borrow from this SOB because of its low interest rates. An across the board payment of three to five percent will not only erase this SOB’s competitive advantage, but also tarnish its reputation because it’s no different from giving out behest loans,” Babbler said.

Babbler said a new member of the SOB’s board, dubbed the “captain ball”, connived with two other fellow directors to adopt this under the table scheme.