The advent of banking reforms in India has brought the concept of NPA
(Non-Performing Asset) which has changed drastically the perception and approach
of the bank and the customer when dealing with loans financed by the bank. The
attitude of the bank and the borrower has created a divide between them leading
to misunderstanding and distrust with the enactment of various Acts for the
recovery of bank debts.
The divide has widened particularly with the enactment of the SARFAESI ACT (The
Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002) where in the bank is empowered to take over the
secured assets without the intervention of the court and also allowing the banks
to undertake recovery proceedings under all the recovery Acts simultaneously
without providing a level playing ground for the borrowers. The prudential norms
introduced on account of the banking reforms have generated more pressure on the
performance and profitability of the banks.
The alarming increase in the NPA has led to resort to more stringent and
desperate measures by the banks with their newfound strength derived out of
SARFAESI ACT and the Insolvency and Bankruptcy Code to recover their loans.
There exists a feeling among the aggrieved defaulted borrowers that SARFAESI ACT
is a draconian law and the bank use harsh methods of invoking the SARFAESI ACT
without understanding their problems and predicaments.
They complain that the bank does not distinguish between an intentional
defaulter and a defaulter due to circumstances beyond his control. The basic
problem is that while the bank thinks that the borrower is responsible for the
account becoming NPA, the borrower on the other hand believes that the many
wrong doings of the bank are the reasons for his account becoming NPA. Thus,
there is a stalemate and an aberration in the respective thinking.
What are the reasons for such divergent views? The basic reason is lack of
effective communication between the bank and the borrower. Communication can
make or mar a relationship. The purpose of effective communication is to
understand and to be understood and the result is the creation of trust between
the bank and the customer which is the key that opens all doors. In any
relationship, the essence of trust is not in its “bind”, but in its “bond”.
Communication, if effective, leads to co-operation that is to say to understand
each other creating an intimate relationship valuing each other views. So, it is
with the bank and its customer. Acceptance comes out of understanding and
acceptance can lead to better customer banker relationship. The banker customer
relationship is complimentary to each other and not contradictory.
But how a congenial and conducive atmosphere of trust and understanding can be
built up? If only the banker and the borrower can understand their respective
roles and duties and responsibilities and how are they interconnected with their
mutual welfare in their correct perspectives, then only can there be an
everlasting enduring and endearing relationship. The banker has certain rights
and so also the customer. But no one should overlook the fact that a right is
derived out of a duty first o be performed. Hence the imperative necessity is
that the rights and the responsibilities of the banker and that of the customer
are to be defined precisely and without any ambiguity.
The primary objective of commercial banks in simple term is to accept deposits
from the public and to lend. Lending for what? Lending for productive and
constructive purposes to the deserving entrepreneurs so that it gives the
required spurt to the economic growth by way of development of commerce and
industry of the country helping creation of wealth for the lenders and its
shareholders, stake holders and all those connected with the banking activities
and ultimately contributing to the creation of wealth and GDP of the nation.
What is the primary objective of the borrower entrepreneurs? To invest the
borrowed funds along with their owned funds to set up industrial and commercial
ventures, developing and expanding further the already existing industrial and
commercial activities leading to the creation of wealth for themselves and the
people connected with the economic activities and ultimately generating further
growth of the economy of the nation contributing to its GDP.
A dispassionate and without prejudice view if taken about the objective of the
banks and borrower entrepreneurs, it is evident that their activities are
complimentary to each other and not contradictory. They are interdependent on
each other and not independent of each other. They are supportive of each other
and not opposing each other. Their sustenance and progress depend on each other
and not on weakening each other. They have necessarily and inevitably to work
together unitedly and in unison to achieve their common objective of building up
a robust economy making the nation a foremost global economic power. But how to
make it happen?
Understanding comes out of a feeling of comfort when being with each other
creating a happy environment and having concern and care about each other
leading to acceptance of each other and facilitating solutions to solve problems
and removing misunderstandings, if any.
Faith, Trust, Hope and understanding are the four sustaining powers of our life.
It is said, “It is better to believe in something and be wrong than believe in
nothing and be right”. Bhagavad Geeta states, “You are what you believe in. you
become that which you believe you can become”. That is the power of faith.
Trust is the foundation of all endearing and enduring relationships because it
creates effective communication which leads to understanding to create an
unbroken bond. That is the power of Trust.
Always remember that our sustaining power is our hope. It is admitted that the
suspense of the life is the nature of the unknown future and until the mystery
of human being’s future is revealed the human wisdom suggests, Wait And Hope
That is the power of Hope.
Understanding is the power to sympathetically persevere the feelings of others
and accept them as they are, having insight and good judgment. Further it is a
relation “of affinity or harmony between people; whatever affects one
correspondingly affects the other”. Through mutual understanding, cooperation
between the lender and the borrower and for mutual benefit, they should jointly
explore new opportunities for development and progress and stability with
sincerity of purpose and purity of heart and with the objective of working
together unitedly and in unison for the veritable realisation of the objectives
of lending and investing by lenders and reaping the fruits of lending and
investing by the borrowers to build up an commercially strong and sustaining
global economy of the world.
Any country or organisation has its own distinct culture, ethics and values
which drives its growth, standing and performance and shapes the quality of its
leadership and the workforce. To keep up the top position is not easy and
sustainable and it is not permanent in the prevailing competitive business
environment. The only way it can keep up to its cherished ambition of reaching
at the top position and retaining it is to follow the great business dictum, “In
management, the first concern of the company is the happiness of the people
connected with it. If the people do not feel happy and cannot be made happy,
that company does not deserve to exist.” If this basic principle is achieved and
maintained, then there is no need to look back and forward moving will be
ensured and assured.
Written By: . R. Radhakrishnan
- Banking & Management Consultant, NPA
Resolution Management Consultant, H. R. Trainer: Corporates, Colleges & Schools,
& Freelance Writer, No. 8, Morya Gardens, Kanadia Road, Indore.452016 (Madhya
The Author invites comments from readers and he can be contacted through his
email: [email protected]