It is noticed that many of Financial Institutions like Banks, Financial Corporations are resorting to attachments and sale of assets of the Industry, Commercial Organizations and Personal properties of the borrowers, guarantors. This act is totally stopping the Industrial, Commercial activity of the Commercial Organization. The Bank, Financial Institution will not get any amount of money as repayment. It has to reschedule to the purchaser. The benefit may be extended to the existing borrower. In addition to above, this act is will have effect on the following areas:
- Waste of material resources, under process, production, finished stocks.
- Loss to creditors for Raw material supplies, financial inflows from debtors, sale of bye products.
- Loss to customers, distributors, and dealers they will not get the supply of goods.
- Loss to employees due to loss of employment, dependent industries, their staff, employees, daily wages.
- Loss to suppliers of other materials.
- Loss to government as low tax collection.
- Loss to industry as a whole.
- Loss to image and goodwill of the sector, group.
- Loss to investor’s confidence.
- Loss to net wealth of the Commercial Organisation, personal Image of the group.
- Loss to productivity due to no commercial activity.
- Loss to quality, the successor may not maintain the same quality.
- Loss to development as a whole. Loss to one leads to loss to many.
To overcome such situation, We suggest the following steps required to be undertaken by the Financial Institutions, Banks:
1). Central Office lending agency may be constituted at every level to look after such situations, multiple loans against the same Commercial Organization should be brought under one roof, disciplinary attitude of borrowers with the fear that they may not be eligible for further loans.
2). The Banks should not write off the loan, the asset should be continued to be the performing asset by re-scheduling the loan based on the repayment capacity of the borrower.
3). The borrower should be given liberty to forecast their repayment schedule along with interest. He may request for more longer period to meet his commitment.
4). The borrower should be asked to reduce his limits gradually so as to reduce current assets as well as current liabilities without effecting the normal commercial activity.
5). The unsecured loans availed by the Commercial organizations should be asked to convert their demand loans as term loans and be supported by collateral security.
6). The Banks should not to indulge for transfer or takeover such loans. All the Banks should be communicated about such fresh loans. Also the management of the company should be asked to take responsibility for repayment of such loans as per schedule.
7). Independent valuations has to be made for such fresh loans, from the third party sources instead of depending upon the information provided by the Commercial Organizations.
8). Strict monitoring is required for such fresh loans through separate management authority. The Commercial Organization should repay the loan by earning but not by additional borrowing.
9). The present management should be made inactive for taking decisions. A separate management authority has to be constituted with the representatives of Present management for their experience, and Representatives from Financial Institutions, Industrial consultants, Business planners.
-CA. K.HANMANDLOO, HYDERABAD
9848071149
