Effective monitoring and control process should be in place for every bank. Each and every account should be studied minutely to understand the strengths and weaknesses of the borrowers and the likely areas of slippages on a regular basis. The intrinsic strengths of the borrowers should be known clearly. The balance sheet of a company will help the banker to some extent but more than that, the banks should know clearly the man behind the figures and statements of the balance sheet.
Risk Management developed by Credit Rating Information Services of India Ltd. (CRISIL) recently offers good scope for nicely handling the above issues. For example, for a manufacturing firm, this newly developed Risk Management offers ample scope to study the level of inventories, raw materials, the level of rejections the borrower was facing, problems in timely supplies, demand-supply gaps across the globe, price movements of raw materials and finished products, etc. All the Banks should be encouraged to strictly follow this Risk Management developed by CRISIL.
It is often seen that one of the main reasons for delinquency by the borrower is diversion of the funds to some other avenues instead of focusing the same for the intended purpose for which the loan is sanctioned. Such diversions should be discouraged at all costs.
The actual requirement of the borrower should be properly understood based on need based.
It is also learnt that at times banks take lot of time in sanctioning loans to the borrower and the time lost due to this also results in the borrower becoming delinquent because his business opportunities could have affected due to this loss of time. In business, timely opportunities do play a crucial role for its success.
Information Technology (IT) can play a very useful role in plugging out as many loopholes as possible by creating a nice system incorporating the above and many more. Therefore, encouragements should be given to different IT Companies to come out with a nice system which can be diligently followed up by all the banking sectors in the country with the sole objective of keeping NPAs to the bare minimum, if not eliminating the same altogether.
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