Page 40 - Banking Finance April 2016
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ARTICLE
NPA any time if not monitored very closely. The total Grey Areas & Measures for Improve-
restructured accounts have crossed Rs.3,25,000 Crores,
thus putting the overall stressed accounts of the Public ment:
Sector Banks (NPAs plus restructured accounts) over 11%.
Most of the banks' NPAs have risen sharply during Information Asymmetry:
December 2015 quarter and few of the Banks have also
turned red because of slippages and heavy provisioning. Proper selection of borrowers makes a difference to a
The statistics given in Table I throw light on the way the quality portfolio. Most of the times, the information mis-
NPAs are heading over a period of last 6 years. match leads to wrong selections. The information which
the borrower has got about himself, his income, his
Table I : Comparison of Gross NPA and activity, project and his property and the information
Standard Restructured Advances over last which the banker has about all these areas, there is
6 years period bound to be a gap. The information gap is due to the fact
that the borrowers may not like to reveal everything to
the bankers apprehending rejection of his case if some
information so revealed is un favourable to the banker.
More the information gap,
more problems banker is
likely to face in due course.
Though some gap is bound to
be there, narrower the gap,
safe it is for the banker.
More informed decision al-
ways helps in protecting the
asset quality.
Source : ICRA Here comes the role of
proper due diligence. Due
The provisioning, capital requirements, thinning margins, diligence is done to bridge the
increased competition, slow pace of economic recovery information mis-match. It is
etc. have all been forcing the banks to pass through a to be remembered here that
critical phase. rather than what sort of due diligence is done, 'how' it is
done makes all the difference. Besides meticulous scrutiny
Though Government and the Regulators have taken many of the papers/documents, the ability of the borrower to
measures of late like the formation of JLF, Strategic Debt run the activity successfully and his willingness to repay
Restructuring, Restructuring of Infrastructure loans should be the main focus points while considering the pro-
(familiarly known as 5:25 scheme), these measures are posal.
yet to take off in a big way. Increased defaults for various
reasons in small loans including agriculture are also adding Improper supervision at the time of disburse-
fuel to the fire. ment:
Building up a healthy asset base with minimum default Many a times, problem starts during the disbursement
rate requires a multi pronged approach among the stage. Improper supervision at the time of disbursement
Bankers right from the day a loan proposal is taken up for leads to diversion or siphoning of funds. Post disbursement
consideration. An effort has been made through this inspections have to happen immediately after disburse-
article to analyse few of the grey areas and measures to ment to ensure end use. Further, constant watch on the
overcome the problems. operations of the account in case of running accounts like
cash credit is a must to ensure there is no diversion of funds
and that the activity is carried out on the desired lines.
40 | 2016 | APRIL | BANKING FINANCE
