NPAs and Frauds - the double whammy for Banks

A couple of days back, a what's app message and a video clip was going viral among the employees of banks. It is reportedly of an assault by the son of a woman borrower on the bank official when he visited the borrower for recovery of loan which has become NPA. It is reported that he was assaulted with iron rods. The fact that the General Manager of the network was briefing the press about the incident confirms the occurrence of the incident.

It is not a one-off incident. Such incidents happen across the length and breadth of the country but many go unnoticed or unreported. Even in Karnataka there are incidents of farmers threatening with dire consequences if the bank officials venture into their villages for recovery of loans. And there are examples of manhandling also.

What does all this indicate? Where from these borrowers get that audacity and arrogance. These are the moot questions that needs to be answered. But those who needs to be answered are burying their heads in the sand. May be it is banks top hierarchy, or the police or the political class or all who refuses to acknowledge that there is an elephant in the room.

This looking at the other way by these functionaries when they are suppose to take punitive action has emboldened the borrowers to take law into their hands. There is one more factor which has given these borrowers some semblance of moral legitimacy to their illegitimate behavior. What is that? This is what I have mentioned in my caption. The proverbial NPAs and the recent and all too sudden spurt in frauds. This is dangerous; has far reaching and widespread implications on the banks ability to lend and recover. The frauds have become a commonplace in the newspaper and is being reported with such an alarming regularity as if they are reporting weather conditions. The inability of the Banks or its supervisor the RBI or their master i.e, the government to take any action when lakhs of cores are classified as NPAs and thousands of cores are swindled through frauds, as I have already mentioned has lent some degree of acceptance of their hooliganism and outrageous acts. The worst fallout of this inability to bring to books, these economic offenders, is the growing resistance of the general and otherwise well meaning borrowers to repay the loans quoting these NPAs and Frauds. When the bank's officials go for recovery, even a man in the remotest area taunts - why you have not recovered from Vijay Mallya. And the latest addition to this is Nirav Modi. And the banker's conscience is really hurt and his morale is lowered though he may pretend otherwise. The urgent need therefore is to take punitive action on these large corporate willful defaulters and fraudsters which should be strong and demonstrative. Then only the last man in the last mile too behave. Otherwise, if it turns into a kind of movement by some ill-advised elements in the society not to pay the loans till the government recovers from the big defaulters, it will be disastrous for the banking system. Though this idea may be farfetched, but it has a distant possibility.

K N Krishnan.
Vice president, SEWA, Bangalore.