Page 33 - Banking Finance June 2019

ARTICLE

Lack of free flow of effective communication helped Ineffective recovery tribunal:
in creating this mud. The Government has set a numbers of recovery
tribunals, which works for recovery of loans and
Staff related issues:
advances. Due to their carelessness and
Too inflexible attitude
ineffectiveness in their work, the bank suffers the
Systems overloaded
consequence of non-recovery, thereby reducing
Lack of motivation their profitability and liquidity.
Lack of trained, technical personnel
The problem India faces is not lack of strict
Lack of delegation of work prudential norms but the legal impediments and
time consuming nature of asset disposal proposal.
Lack of commitment to recovery
The PCA and IBC both too do not guarantee that
Fear of accountability and disciplinary action even
there will be no further leaks. Both processes have
after many years of work.
limitations in addressing structural issues
Lack of proper accountability of staff at different
associated with internal controls, internal audit and
levels associated with the appraisal, sanction, and
governance mechanisms.
disbursal and follow up of loan cases.
Sluggish legal system:
Priority loan target:
Sluggish legal system made it difficult for banks to
The PSL sector has contributed substantially to the
recover these loans from both corporate and non-
NPAs. Poverty elevation programs like IRDP, RREP,
corporate because of
SUME, SEPUP, JRY, PMRY etc., failed on various
Long and tedious legal process
grounds in meeting their objectives. The huge
amounts of loan granted under these schemes Changes that had taken place in various laws
were totally unrecoverable by banks due to many
Lack of sincere effort.
reasons. There are no strict guidelines in the
Lopsided judicial process
recovery of money given in these types of schemes
and moreover some other factors also fuel to fire Absence of tough measures against fraudsters
like political manipulation, misuse of funds and soon. Industrial sickness/ Crisis:
Inadequate contingency planning: Industries depend on banks to fulfil their projects and
Failure of Banks by not conducting adequate the reverse is also true. Industry crisis had hit the
contingency planning, especially for mitigating banking sector very hard. Some reasons for industrial
project risk did not factor eventualities like failure crisis are
of gas projects to ensure supply of gas or failure of Inappropriate project handling
land acquisition process for highways.
Ineffective management
Bank just postponed the problem in order to show
Lack of adequate resources
higher earnings. These accumulated iceberg of NPA.
Lack of advance technology
It is not the result of just one day but the ice was piling
up from the many years before. Day to day changing government. Policies produce
industrial sickness. Sectors like textile, aviation,
mining and infrastructure suffered a lot contributed
Mess caused by others
to most of the NPA.
Improper technology:
Therefore, the banks that finance those industries
Due to improper technology and management
ultimately end up with a low recovery of their loans
information system, market driven decisions on real
reducing their profit and liquidity.
time basis could not be taken. Proper MIS and financial
accounting system is not implemented in the banks, Lack of overall demand in the market :
which leads to poor credit collection. Entrepreneurs in India could not predict their product

BANKING FINANCE | JUNE | 2019 | 33