Managing Non Performing Toxic And Stressed Assets


by Ashok Agarwal

In the most modern terms the assets are mainly of two types as physical and human. Out of these the human assets are most important as the physical assets are handled by human factor. In fact the balance sheets are quantitative and and jugglery of cooked data. The qualitative side of the organization is missing. All the stakeholders believe the balance sheets signed by the statutory auditors. We need to see between the data as to what extent these balance sheets depict the qualitative aspects of the enterprise. Behind every show what our eyes see the man’s mind is working. So to keep everything performing the human factor need to perform excellently. In fact human factor quality is shaping the organization. Today the new theories say that HR manager is also a Brand Manager. Well-groomed quality human assets will use the physical assets economically, efficiently and effectively leading to minimization of costs and wastes and maximization of turnover, returns, dividends and the most important is quality enhancement. The human factor is such a important one that it changes many business equations such as cost-benefit analysis, input-output analysis and SWOT Analysis. The impact and role of various tools will drastically undergo change once the human factor is handled successfully and skilfully. It is rightly said that take care of human assets and the physical assets will take care of itself. It too is rightly said that organizations do not earn profits , but people earn profits .

We can plug the non-performance and arrest the physical assets from turning non-performing, toxic and stressed. Our assets whether human or physical need to assessed in the market at premium because our utmost faith in fine values of business ethics. By wrong principles one can progress for few days but soon he will be out of the market. ONLY VALUES MAKE YOU STAY, THRIVE AND SURVIVE IN THE MARKET. As on date even bankers have no other criteria except to assess the credit facilities (FB & NFB) based on quantitative balance sheets submitted. Today banking industry is confronted with the sizable amount of non-performing assets. It is all people’s money deposited with the banks which is lent. Even margins and cushions too are arranged within the limits as the data is inflated. So the promoter is left with no stake / interest in the unit and can anytime wind up the unit. The funds are diverted to other uses . The problem of NPAs arises when the end use of lent funds is not ensured.Whether in coming days we can think of other basis for assessing credit facilities? There is a need to RELOOK & RETHINK over this aspect. The public money cannot be permitted to be converted to NPAs like this. Present RBI Governor is going to be very strict on NPAs. He is going to fall heavily on the so-called wilful defaulters which is major % of NPAs. Promoters have adequate net-worth but their integrity is 100% doubted. There is no impact of such borrowers on their personal life for unit having gone NPA. How the promoter can go healthy when the unit is sick if it is a genuine case? Such wilful defaulters must be taught a lesson through media, other credit rating agencies, CIBIL etc . must be banned to avail any credit facility from any bank / FIs. In this credit history of the borrower is very important. We must come out with the drastic steps to recover such bad assets not accruing anything. INCOME IS NOT GENERATED BY SIMPLY DEBITING . IT IS TREATED INCOME WHEN IT IS RECOVED FROM BUSINESS INCOMES ONLY.

Whatever primary and collateral securities bank has accepted to cover its exposure must be acted upon with 200% of the value of limits (FB&NFB) must be sound , having clear marketable title , with banker’s lien marked / noted with the concerned agencies, adequately insured in favor of bank , periodically inspected / reviewed etc. Over and above all this, the banker’s interest lies in the RUNNING UNIT and nothing else, so that the amounts lent are recycled and asset stays performing and the borrower client honors its commitments well in time. Inspite of 200% securities the margin / cushion also needs to be monitored. The market feasibility and viability studies are very important for keeping the unit performing from financial, marketing, operational, technical and managerial angle etc. Monitoring of the unit is not a one time measure but it is an ongoing process as any lapse / leniency in this regard may lead to NPA. To keep the assets performing continuous vigil is required not only on unit but borrower too. The best measuring rod for performing / standard assets is to monitor the end use of funds lent. The transactions in the account need to be closely monitored. Account is the mirror of the business as it gives NPA signals very well before time. If account goes NPA the fault primarily lies with the lending agencies officials and matters attract investigation to be transparent and fix accountability.

Ashok Aggarwal, DELHI
DATED 07.09.2015