Reimpose confidence
The confidence is reimposed on Indian banking system by an experienced professional. http://m.firstpost.com/business/why-there-arent-many-takers-for-vinod-rais-optimism-on-bank-npa-problem-2781252.html . In fact generation of NPA is an persistent issue with the banking system and the ability to handle such eventualities by Indian banking system is time tested. The difference is in the system. The general psyche of the bank officials was affected by the general perception about fault in the decision making process. It is practically not possible for the bankers to foresee business fluctuations and built up a mechanism to keep lending under restraint in case of such downfall. But the bank officials could extend support those units at the time of distress by carefully exercising their delegated power. Many of the large corporate functioning with stability at present had passed through critical stages when bankers extended their support to them.
There was a change in the perception during the last decade and many bankers faced the threat of accountability for taking decisions in support of those ailing units. Apprehension about accountability has vitiated the lending atmosphere and bank officials became scared to take decisions in favor of distressed units. There were external interventions to facilitate the process of sanctioning and many corporate borrowers started availing availing services of such external agencies. In certain situations , over enthusiasm to achieve targets resulted in certain degree of default , since bankers also depended on submission of information by such facilitators.
The slow down in decision making resulted in customer dissatisfaction and the natural counselling available to the obligors became scarce. Even in cases of genuine requirement, which is backed by RBI advise for allowing hand holding operation, the bankers hesitated to take decision in favor of the constituents. The support expressed by RBI governor as well as Shri Rai is a genuine concern of persons of professional excellence, who could visualize the fall out of such inaction. The policy makers should address the crisis and reinstate confidence of the lenders. Their decisions should be respected and denial should be closely examined. The solution to the problem of generation of NPA lies in improvement of the morale of the decision makers by creation of a conducive atmosphere. The intention of the regulator and administrator should be demonstrated and experts in the field with experience and knowledge should empathize good decision makers, which will be in the national interest.
