The most important aspect in credit appraisal and assessment and monitoring in banking is the capacity of the sanctioning, monitoring, and reviewing authorities to take timely decision based on the performance of the past and the prospects of the future to meet the challenges of the present so as to prevent the account becoming Non-Performing Asset (NPA). The effectiveness of the decision depends upon understanding the existing market realities, ability to predict the future trends, perspectives of the business environment and efficacy of risk management. But this is the area where most deficiencies are found in the effective management of Non-Performing Asset (NPA). The basic behavior and strategy are decided through priority decisions which convert good intentions into effective commitments and insight into actions. But the decision making is full of risk and responsibilities and accountability and here lies the entire problem.
The most important factor for the decay in effectiveness is the “Fear Psychosis” prevailing among all sections of employees, particularly among the officers, managers, and executives including Managing Directors and C.E.Os of the banks. Timely decisions are so vital in banks, which if not taken, would prove detrimental to both the customer and the bank. Managerial job requires making decisions to commit extensive resources of finance and usually involve an impressive level of uncertainty with respect to the outcome or result. The banks are laden with rules and regulations that the initiative is blunted.
Since the results of decision are most unpredictable because so many variables and external factors are involved, the decisions are to be made systematically, deliberately and consciously with due care. It is better to make firm decisions and carry it out and goes wrong than to shirk decision making as unpleasant and painful job as a result, to allow the accidents of business to set priorities by default. It is true that banks should minimize risk and maximize opportunities. But if the behaviour of the banks is governed by the attempt to escape risk, it will end up by taking the greatest and least risk of all, the risk of doing nothing.
No officer or executive wants to take timely decision, even if their decision is inevitable on most important matters, simply because of the fear that they may become accountable for their acts of commissions and omissions and error of judgment. The “Fear Psychosis” is outcome of fixing up responsibility and punishing ruthlessly devoid of any sensitiveness to intentions of the decision maker and needs of the circumstances. This has created suspicion and mistrust among the employees and executives including top executives and also the borrower and the management of the bank. Mutual trust is the basis of all transactions in banks, be it customer-banker relationship or employer-employee relationship and also among all other stake holders. The situation prevailing in banks is such that everybody wants to save one’s own skin, come what may to the customer or the bank.
The one and the only remedy is to bring the employees of all categories out of their present negative perceptions and “Fear Psychosis” and to motivate them to make firm commitment; a commitment to produce economic results through contribution of their knowledge and efforts, a commitment to take responsibilities and concentrate on opportunities and results and finally a commitment to take systematic, purposeful and organized discharge of economic risks in their own job and work as well as in the total business. The knowledge employee on whom so much depends should be held to high demands for efforts and performance and they should also make high demands on the job for self actualization and satisfaction. Procrastination of decision and action to prevent the account slipping into NPA is very much detrimental and hence should be completely eliminated.
A spate of arrests of senior executives and other officers including Managing Directors and CEOs of many banks on account of the alleged frauds committed by prominent clients allegedly in connivance with these officials for the reasons these executives have taken certain decisions to sanction banking facilities to these alleged fraudsters. Mostly the charges framed on these officials come under criminal category of cheating, conspiracy, and corruption. Are these actions taken against bank officials going to eliminate accounts becoming NPAs? What is going to be the result of such harsh actions? In the already charged banking environment of ‘Fear Psychosis’ such fear among the bank employees and executives would lead to decision paralysis which will badly affect the banking operations. Ultimately it will lead only to create more executive chair custodians who are only interested in their self preservation rather than becoming business builders and decision makers exhibiting great qualities of leadership.
Recruitment of human resources with positive attitude and training them to become self actualized work force plays a very important role in the making of an enterprise. “Human resources are like natural resources; they’re often buried deep. You have to go looking for them; they’re not just lying around on the surface. You have to create the circumstances where they show themselves.” Leadership is pivotal to produce the results and it is turning a vision into a mission to achieve success by planning to do the right things and doing the things right.
(The author invites comments from readers and he can be contacted through his e-mail id [email protected] or mobile – 9229248048)