Vinu: Manu, what is the basic difference between consortium and multiple banking?

Manu: In a consortium, banks lend jointly with shared information and a lead bank. In multiple banking, different banks lend independently without full coordination.

Vinu: Which structure is riskier?

Manu: Multiple banking. Lack of information sharing increases the chances of over-financing and fund diversion.

Vinu: From the beginning, what is the first risk bankers should check?

Manu: Total exposure. A borrower may show ₹5 crore turnover but take ₹4 crore limits from different banks—clearly overleveraged.

Vinu: How does fund diversion happen in such cases?

Manu: Funds from one bank are used to repay another or rotated across accounts, creating artificial turnover without real business activity.

Vinu: What about stock financing risks?

Manu: The same stock of ₹1 crore may be shown to multiple banks to draw higher limits. Without proper sharing, banks fund the same asset multiple times.

Vinu: Does consortium solve this problem?

Manu: To a large extent, yes. Regular meetings, shared stock statements, and common appraisal reduce duplication of funding.

Vinu: Are there still risks in consortium lending?

Manu: Yes. Delays in decision-making and over-reliance on the lead bank can weaken monitoring.

Vinu: How should bankers protect themselves in multiple banking cases?

Manu: Obtain information on other lenders, check CIBIL reports, verify charge registration, and monitor account turnover strictly.

Vinu: Any red flags specific to such arrangements?

Manu: High receivables, frequent fund transfers between banks, and inconsistent financial data across lenders.

Vinu: Final takeaway?

Manu: More banks do not mean less risk. Without coordination, risk actually multiplies.

Vinu: That’s a critical insight.

Manu: And essential for every credit decision involving multiple lenders.

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