CONSORTIUM VS. MULTIPLE BANKING |
The borrowers, particularly the big ones, are nowadays a very happy lot as the bankers run after them offering cheap finance. This has given birth to the practice of multiple banking—a situation when one borrower is banking with many banks. This should have been governed under the concept of consortium financing.
Under consortium financing, several banks (or financial institutions) finance a single borrower with common appraisal, common documentation, joint supervision and follow-up exercises, but in multiple banking, different banks provide finance and different banking facilities to a single borrower without having a common arrangement and understanding between the lenders. The practice of multiple banking has increased tremendously during the last years . This is due to the increasing competition and the bankers desire to grow in a short span of time.