Page 31 - Banking Finance June 2019

ARTICLE

Wrong calculation of time and cost during the project Handling the proposals both at appraisal, sanction
implementation stage leading to liquidity strain. as well as at disbursement level by inexperienced
and untrained staff.
Project not completed in time resulting in increasing the
cost. Lenient Lending Norms:- One important reasons of
rising NPAs is the lenient lending norms especially for
Imbalanced/Improper capital management: using
corporate houses where their financial status and credit
short term capital in long term project/assets
rating was not analysed properly.
In-ability of the corporate to raise capital through the
Poor Credit appraisal: Due to poor credit appraisal the
issue of equity or other debt instrument from capital
bank gave advances to those who were not able to
markets.
repay it back.
Huge borrowing from the different market
Not selected the borrower very cautiously and took
Poor credit collection/poor recovery of receivables. tangible assets as security to safe guard its
interests.
Fraud/Mis-appropriation in the company/organization/
business Not proper considering of the proposals on the basis
Marketability
Business failures for many reason
Acceptability
Getting loan with an intention to default only and
Safety
creating a nexus of such like-minded people in system.
Transferability
Family disputes among the owners of organizations
which often lead to the failure of business. Not following the principle of diversification of risk
based on the famous maxim "Do not keep all the
Management disputes.
eggs in one basket". It means that the banker
High cost/scarcity of raw material, power and other should not grant advances to a few big firms only
resources. or to concentrate them in few industries or in a few
Living lavishing life styles without caring business. cities.
Lack of patriotism and mind-set. Monitoring and follow-ups failure: Monitoring and
follow ups failure at the time of
Manipulation of debtors using political influence
Pre sanction: proper selection of borrower
Mess caused by Bank Disbursal:
Defective Lending process: That resulted into wrong Delaying the disbursement
selection of borrower Compromising with the quality of security
Bank Ignored the principles of bank lending
Avoiding actionable steps at the early stages
Principles of safety: Means that the borrower
of indication of slippage to NPA category
is in a position to pay back the loan, including
Post sanction:
both principal and interest. Analysing capacity
Absence of regular industrial visit: The
to pay and willingness to pay of the borrower
irregularities in spot visit also increases the
Principle of liquidity
NPAs, absence of regularly visit of bank officials
Principles of profitability to the customer point decreases the collection
of interest and principals on the loan.
Delay in sanction
Business targets/competition pressure: In the
Delay in settlement of payments/disbursements
pressure to achieve business targets the rules and
Micro observations leading to tough stand on issues procedures for prudent bank were forgotten. Even the
Compromising with the quality of security and its bank management relaxed or we can say played with
realizable value in white money. the rules for

BANKING FINANCE | JUNE | 2019 | 31