Who approves the Bank loans? Bank Manager approves or is it a seperate loan approval department?
I have seen many clients getting loans from the banks. Each bank seem to have different set of rules. In some banks manager approves the loan, while some banks they send papers to their higher officers for approvals.
It seems getting loan from government owned banks is more difficulat for example State Bank of India. People get loans easily from co-operative banks and private sector banks.
What is the procedure that bank follows? Who are in the default in case a loan goes wrong, i mean if laons turns in a NPA (Non Performing Asset)?
Yes each and every bank has their own set of rules. Normally the limits and documents are decided by different factors like RBI guidelines, Know Your Customers norms and internal rules of bank.
Banks fix the limits on each head to approve the loans. Most of the banks have their internal department, and its called Loan processing department. This department scrutinize the documents and hire third parties to verify the details of applicant.
In most of the cases small loans are approved by manager controlling the branch. If the loan amount is higher than his approving authority than loan is approved by higher officers.
Each and every officer have the pre-defined approval limits, and loan is senctioned depending on the limits. Normal procedure what i have seen is:
- Once you apply for the loan, receiving branch sends the report to higher branch
- If the loan amount is within approval limits of branch manager, he himself approves the loan
- Otherwise loan is processed at higher levels
Few things banks consider before senctioning loan are Income proof (Repayment capacity) and CIBIL report etc.
Regarding NPA, if the loan was senctioned after proper verification and was approved in interest of bank i believe bank does not take any action against officer approving it. Different banks may have different rules internally.