Why the Genuine Stressed Account should be Punished by Higher ROI & Penalties?

My views may not be acceptable to banking people but I fail to understand why a stressed account (not in position to stand properly & needing immediate support) should be punished in this manner. We have noticed that the moment a borrower defaults, he is classified to Special Mention Account (SMA)-1, then SMA-2 and finally NPA. This is the stage where such units who have paid huge amount of interest and other income (LC/BG charges, Processing fees and other banking charges) during their long good days to their lenders. Is it not unfair on the part of lenders to instantly punish them with penal interests, higher rate of interest, higher margins on working capital funds, higher charges towards various inspections, audits, due-diligence  and so on?  Is it not criminal to push the stressed accounts further into stress from where they can’t even think of coming out?

I don’t agree that defaulting accounts should be treated with iron hands with the sole objective of recovery and killing them. This way even recovery will be adversely affected. In many cases we have noticed that the stake holders are not the borrower only. There are large number of other stake holders like employees, laborers, suppliers, small agencies providing various services etc. All these stake holders are the worst hit by the improper actions of the lenders. These poor service providers should be given due priority over the secured lenders. Such attitude or policy for the established long standing clients is not justified as these banks are mainly surviving on the small depositors’ money. Secured lenders should not behave in such manner that interest of all other stake holders get into flames.

In good times if a borrower had been cash cow, it should not be slaughtered so mercilessly immediately after finding difficulty in giving milk.  

There should be proper mechanism  of dealing with the stressed accounts. Theoretically, lot of steps have been taken by the authorities but mostly are either impractical or diverted for personal benefits. The concept of Asset Reconstruction Companies   has also miserably failed due to the commercialization  and huge entry barrier.

There should be detailed study as to how the lenders behaved post stress, how many units were revived and how the hand holding happened. At least for the well established borrowers, the rehabilitation and concessions should be automatically extended. In recent past millions of people have been thrown out of job due to mishandling of stressed/defaulting accounts by the lenders in our country. Similarly millions of other people who were involved indirectly by providing goods and services to these units have suffered badly.