However, following the steady increase in the level of bad assets in the banking industry and the downgrade of India's largest lender - State Bank of India (SBI), banks have decided to monitor even small sized loans.

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The finance ministry has also asked banks to carry out an immediate assessment of their non-performing asset (NPA), documentation of the same and adherence of banking guidelines.

"We will monitor small retail loans also, until now we have primarily focused on bigger loans," said PK Anand, executive director, Punjab & Sind Bank.

The Reserve Bank of India (RBI) has also asked banks to monitor their asset quality on a regular basis especially since interest rates have steadily inched upward. State-owned banks have witnessed a surge in the level of bad assets.

The gross NPA of public sector banks for the period ending March, 2011 stood at Rs 71,047 crore.

Over the last few months, many banks have reported rising instances of irregular loan repayments as equated monthly installments (EMIs) have risen many times.