Revival of Stressed Account: Employee Participation

In last some of my posts I had shared my views on one of the most sensitive issue of banking sector currently i.e. Stressed/ NPA accounts. There are lot of discussions, analysis and suggestions in this regard. Infact, this issue has in last three years surpassed all the other issues in banking industry affecting the new businesses severely. As mentioned by me only one side is not to blame for this situation. Lenders are equally responsible for this which they should accept, correct and move forward. Just reprimanding the borrowers and branding them fraudsters will not serve any purpose. Rather this will cause huge financial losses to the lending fraternity along with the unemployment of large number of lower class people . The situation deteriorates when there is panicness to use all the tools available in the rule book. The race to prove intelligency, honesty and dedication by employees from the lending side is proving quite costly to the whole system . Although it is a tough task to revive a unit which is failed and that too if that has happened due to manipulative tactics of the borrowers, but such cases can be segregated and handled in different way . Whereas genuine cases, which are much more in number, shall be handled with care which will not only help the lenders in realising their money in long run but also save  the life of many poor families who are dependent on such units. As per data available more than 4 lac units have become sick causing unemployment to more than 100 lac employees . 

To revive the units lenders should take positive view as they had appraised the units in past. There may be some miscalculations or situations beyond the control of the borrowers which led to sickness. Also, the revival can be with stringent conditions like severe monitoring, management interference , takeover of management if required and pledging full equity. In addition to this the employee participation in management and equity sharing with the employees can prove to be a good idea. The assessment shall be genuine and practical with long term perspective . In my view the revival should be given try to the maximum possible before resorting to the killing of the unit. Let the poor labour / employees who have become job less earn their bread from families and also participate in the ownership of such units. With better participation, no one can stop the sick units from revival.  Also, the period of revival should be sufficient enough based on proper appraisal of the project and situation so that it is not repeated. We have noticed in many cases, particularly infra sector, where the actual cash flow can service the debt in 15 years but to make the proposal attractive, the projections have been manipulated and ultimately debt could not be serviced in time.