Friends
In last some of my
posts I had shared my views on one of the most sensitive issue of banking
sector currently i.e. Stressed/ NPA accounts. There are lot of discussions,
analysis and suggestions in this regard. Infact, this issue has in last three
years surpassed all the other issues in banking industry affecting the new
businesses severely. As mentioned by me only one side is not to blame for this
situation. Lenders are equally responsible for this which they should accept,
correct and move forward. Just reprimanding the borrowers and branding them
fraudsters will not serve any purpose. Rather this will cause huge financial
losses to the lending fraternity alongwith the unemployment of large number of
lower class people . The situation deteriorates when there is panic ness to use
all the tools available in the rule book. The race to prove intelligency,
honesty and dedication by employees from the lending side is proving quite
costly to the whole system . Although it is a tough task to revive a unit which
is failed and that too if that has happened due to manipulative tactics of the
borrowers, but such cases can be segregated and handled in different way .
Whereas genuine cases, which are much more in number, shall be handled with
care which will not only help the lenders in realising their money in long run
but also save the
life of many poor families who are dependent on such units. As per data
available more than 4 lac units have become sick causing unemployment to more
than 100 lac employees .
To revive the units
lenders should take positive view as they had appraised the units in past.
There may be some miscalculations or situations beyond the control of the
borrowers which led to sickness. Also, the revival can be with stringent
conditions like severe monitoring, management interference , takeover of
management if required and pledging full equity. In addition to this the employee participation in management
and equity sharing with the employees can prove to be a good idea. The
assessment shall be genuine and practical with long term perspective . In my
view the revival should be given try to the maximum possible before resorting
to the killing of the unit. Let the poor labour / employees who have become job
less earn their bread from families and also participate in the ownership of
such units. With better participation, no one can stop the sick units from
revival. Also, the period of revival
should be sufficient enough based on proper appraisal of the project and
situation so that it is not repeated. We have noticed in many cases, particularly
infra sector, where the actual cash flow can service the debt in 15 years but
to make the proposal attractive, the projections have been manipulated and
ultimately debt could not be serviced in time.
CP Jain
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