"It has a substantial balance towards more privileged borrowers vis-a-vis small borrowers. Project appraisal is not proper; it has not been done after looking into when the commercial operations will start, or what will the cost flow analysis be." he added.
Chakrabarty, who handles banking supervision, added the central bank continued to look into suggestions proposed by a panel last month to examine how companies restructure their debt with their lenders.
That panel had recommended higher loan-loss provisions by banks and greater "sacrifice" by founders or controlling shareholders of troubled companies, among other measures.
The rise of bad debt is becoming an issue in India, with corporate loan restructurings surging 156 per cent to a record high in the financial year that ended in March, as slowing economic growth proved a drag on borrowers' ability to repay debts.
Chakrabarty also expressed concern that banks would push companies to restructure their debt in order to avoid defaults that would show up as non-performing assets (NPAs) in their books.
Banks have been criticised for too readily agreeing to recast a company's debt, without prudent checks, or providing additional loans to stressed borrowers, often indirectly, to enable them to repay existing loans.
"It appears that effort was more to avoid accounting classified as NPAs, that is our conclusion," he said.
The comments come a day after the country's largest state-owned lender, State Bank of India (SBI), posted bad loans growth nearly double what was expected.
(With inputs from Reuters)