The bank and the borrower: A relationship of trust, faith, hope and understanding
The advent of banking reforms in India has brought the concept of NPA (Non-Performing Asset) which has changed drastically the perception and approach of the bank and the customer when dealing with loans financed by the bank. The attitude of the bank and the borrower has created a divide between them leading to misunderstanding and distrust with the enactment of various Acts for the recovery of bank debts. The divide has widened particularly with the enactment of the SARFAESI ACT (The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) where in the bank is empowered to take over the secured assets without the intervention of the court and also allowing the banks to undertake recovery proceedings under all the recovery Acts simultaneously without providing a level playing ground for the borrowers. The prudential norms introduced on account of the banking reforms have generated more pressure on the performance and profitability of the banks. The alarming increase in the NPA has led to resort to more stringent and desperate measures by the banks with their newfound strength derived out of SARFAESI ACT and the Insolvency and Bankruptcy Code to recover their loans. There exists a feeling among the aggrieved defaulted borrowers that SARFAESI ACT is a draconian law and the bank use harsh methods of invoking the SARFAESI ACT without understanding their problems and predicaments. They complain that the bank does not distinguish between an intentional defaulter and a defaulter due to circumstances beyond his control. The basic problem is that while the bank thinks that the borrower is responsible for the account becoming NPA, the borrower on the other hand believes that the many wrong doings of the bank are the reasons for his account becoming NPA. Thus, there is a stalemate and an aberration in the respective thinking.
What are the reasons for such divergent views?
The basic reason is lack of effective communication between the bank and the borrower. Communication can make or mar a relationship. The purpose of effective communication is to understand and to be understood and the result is the creation of trust between the bank and the customer which is the key that opens all doors. In any relationship, the essence of trust is not in its 'bind', but in its 'bond'. Communication, if effective, leads to co-operation that is to say to understand each other creating an intimate relationship valuing each other views. So, it is with the bank and its customer. Acceptance comes out of understanding and acceptance can lead to better customer banker relationship. The banker customer relationship is complimentary to each other and not contradictory.
But how a congenial and conducive atmosphere of trust and understanding can be built up? If only the banker and the borrower can understand their respective roles and duties and responsibilities and how are they interconnected with their mutual welfare in their correct perspectives, then only can there be an everlasting enduring and endearing relationship. The banker has certain rights and so also the customer. But no one should overlook the fact that a right is derived out of a duty first o be performed. Hence the imperative necessity is that the rights and the responsibilities of the banker and that of the customer are to be defined precisely and without any ambiguity.
The primary objective of commercial banks in simple term is to accept deposits from the public and to lend. Lending for what? Lending for productive and constructive purposes to the deserving entrepreneurs so that it gives the required spurt to the economic growth by way of development of commerce and industry of the country helping creation of wealth for the lenders and its shareholders, stake holders and all those connected with the banking activities and ultimately contributing to the creation of wealth and GDP of the nation.
What is the primary objective of borrower entrepreneurs?
To invest the borrowed funds along with their owned funds to set up industrial and commercial ventures, developing and expanding further the already existing industrial and commercial activities leading to the creation of wealth for themselves and the people connected with the economic activities and ultimately generating further growth of the economy of the nation contributing to its GDP.
A dispassionate and without prejudice view if taken about the objective of the banks and borrower entrepreneurs, it is evident that their activities are complimentary to each other and not contradictory. They are interdependent on each other and not independent of each other. They are supportive of each other and not opposing each other. Their sustenance and progress depend on each other and not on weakening each other. They have necessarily and inevitably to work together unitedly and in unison to achieve their common objective of building up a robust economy making the nation a foremost global economic power. But how to make it happen?
Understanding comes out of a feeling of comfort when being with each other creating a happy environment and having concern and care about each other leading to acceptance of each other and facilitating solutions to solve problems and removing misunderstandings, if any.
Faith, Trust, Hope and understanding are the four sustaining powers of our life.
It is said, 'It is better to believe in something and be wrong than believe in nothing and be right'. Bhagavad Geeta states, 'You are what you believe in. you become that which you believe you can become'. That is the power of faith.
Trust is the foundation of all endearing and enduring relationships because it creates effective communication which leads to understanding to create an unbroken bond. That is the power of Trust.
Always remember that our sustaining power is our hope. It is admitted that the suspense of the life is the nature of the unknown future and until the mystery of human being's future is revealed the human wisdom suggests, 'WAIT AND HOPE'. That is the power of Hope.
Understanding is the power to sympathetically persevere the feelings of others and accept them as they are, having insight and good judgment. Further it is a relation 'of affinity or harmony between people; whatever affects one correspondingly affects the other'. Through mutual understanding, cooperation between the lender and the borrower and for mutual benefit, they should jointly explore new opportunities for development and progress and stability with sincerity of purpose and purity of heart and with the objective of working together unitedly and in unison for the veritable realisation of the objectives of lending and investing by lenders and reaping the fruits of lending and investing by the borrowers to build up an commercially strong and sustaining global economy of the world.
Any country or organisation has its own distinct culture, ethics and values which drives its growth, standing and performance and shapes the quality of its leadership and the workforce. To keep up the top position is not easy and sustainable and it is not permanent in the prevailing competitive business environment. The only way it can keep up to its cherished ambition of reaching at the top position and retaining it is to follow the great business dictum, 'In management, the first concern of the company is the happiness of the people connected with it. If people do not feel happy and cannot be made happy, that company does not deserve to exist.' If this basic principle is achieved and maintained, then there is no need to look back and forward-moving will be ensured and assured.