One of the most
popular NPA issue these days is of Kingfisher owned by Mr Vijay Mallya. In fact
it has become brand of all NPAs. Whatever be the reason for this episode of NPA
but it has touched the general public too who feels that businessmen have
cheated the banks and siphoned off money. It may be right to some extent but in my view not all the NPA
are same. KFA issue is different where the funding was done considering the brand
valueas major security, which is invisible. Bankers were well aware of the
assets they are considering to secure the loan to this company. KFA matter is
also victim of the market situation to some extent as all the airlines were in
loss when this company got defaulters. Bankers were not worried considering the
other flourishing businesses of the group. It was only of late that the bankers
felt need to act but by that time it was all over. This episode has left many
teachings behind i.e.:
2. Intangible
assets are intangible and most risky when in need as these vapour or build as
per the situation of the company. It can't be otherwise. I have not seen any incidence
where the company is going down but the brand or goodwill is going up. When
taking it as security, we think reverse which is not practical;
3. The core principle
of the lending should be business viability not the other verticals of the
group. If the business is not profitable, be cautious. Other group businesses
are going to make the matter complicated when needed. Also, the lending seems
to be substantially affected by the political connections otherwise no banker
would lend money to stressed account.
4. The monitoring
has to be improved. For the large borrowers, even if they are highly reputed,
cautious approach should be followed. They may feel offended but money is money.
Bankers should not mix the personal relationship with the business. After all
it is not your money.
5. Last but not least, recovery actions should be prompt and not delayed otherwise it will be too late to recover money. If lenders are hand in glove with the borrower, who will save the institution. “Jab Manjhi hi Kashti Duboyega, kaun bachayega.”
There should be thorough inquiries in the
matter and honest actions should be taken otherwise we will continue to
experience many such episodes.
Such cases are
being projected as if only one side is in fault and other side is pity who does
not know what to do. In my view for quite long time in almost all the parties
and functions, the lenders were also participating, they knew the usage of
funds, they were aware of the stress in the company and still sanctioning new
funds just to keep the books in good shape. There may be various other angles
of the case, reasons for entertaining to this extent, loose monitoring, poor
appraisal and extra ordinary favour to this group, but it is of no use now.
Fact remains that once again lenders have been exposed about their way of
working, favouritism, poor knowledge, stubborn approach, egoist attitude and so
on. Legal system is again being burdened to act and help the lenders to recover
the money. Are not they equally responsible for this situation. They can't hide
behind any curtain of ignorance. They deserve equal punishment. After all, they
are the trustees of the public money. They are being paid handsomely and they
enjoy lot of luxury and privilege.
C P Jain
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