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How to curb NPAs in the country
Non-performing assets (NPAs) should always be taken seriously by the banking sectors. Continued efforts should be made to ensure that NPAs are to be bare minimum and do not rise significantly for any bank during any financial year. The economy of a country is deeply influenced by the percentage of NPAs during a period of time.

The following are some solutions which would help keep NPAs well under control:

Based on the experience of a successful professional employee with the banking sector on this issue, the first stage is proper evaluation process and this should be based on objective evaluation. The submitted project should be economically viable and technically feasible. The project should have Reserve Bank of India?s concurrence with clear scope for generating income. Once the loan is sanctioned, the subsequent follow up should be done nicely. If the delinquencies are beyond the control of the borrower, due to natural calamities like excess of rain or drought or famine etc. the banker should accordingly attempt to reformulate the loan taking into consideration the repaying capacity of the borrower in view of the changed circumstances.  The point to be noted here is recovery will always be at the cost of the borrower?s prosperity.  The recovery process is an ongoing process and efforts should always be made to professionally handle this subject matter.  People involved in the recovery process should be of men with bright integrity, honesty and should always make the borrower feel that every step being taken is in the best interest of the borrower.  Additionally, the language used with the borrower should be healthy and positive and borrower should not be blamed directly for any delinquency of loans and therefore the attitude of the banker dealing on such issues matters a lot!!!

  • 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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