This refers to the editorial `Make mandatory risk-disclosure' (Business Line, October 13), which rightly concludes that a mindset change among Indian banks is necessary. Banks still seem to think they are doing borrowers a favour by lending money.

It is perhaps time to revisit the whole concept and method of lending, and for banks to widen their lending net. In this context, the editorial's suggestion to switch more to transaction-based lending is relevant.

Such an approach will not only expand the credit portfolio of banks but also boost economic activity; at the same time also mitigate the credit risks arising out of balance-sheet-based lending.

Transaction-based lending will also see a gradual waning of the practice of under/over-pricing credit risk and further improve the relationship between banks and borrowers. Transaction-based lending, which captures the changing dynamics of corporate financing, can further improve the relationship between banks and borrowers as it involves frequent and continuous contacts, which itself will bring in better quality and quantity of business.

T. V. Gopalakrishnan

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