The Role of the Banker While Selecting the Borrower

June 19, 2012 by  Filed under: Credit 

Lending is an art and every banker is required to exercise utmost caution during the course of selection of a borrower. The banker should not hesitate in spending as much time as possible while selecting the borrower and once the loan is sanctioned, the ball is left to the court belonging to the borrower and the bank is in a position to depend upon the borrower for recovery of loan.

Even though the bankers are having a lot of recovery mechanisms nowadays through which they can approach the borrowers for getting their dues in time, many times they are not successful on account of many reasons:

Genuine borrowers: There are certain borrowers who are interested to remit their dues; however, they may not be in a position to remit the dues on account of the facts that:

a. They might have spent heavy amount towards meeting the educational expenses of their children;

b. They might have paid the hospitalization bills towards medical treatment to some of their family members;

c. The borrower himself might have been in the hospital on account of illness or some unforeseen circumstances and he might have not earned salary during such period;

d. There might have been some losses in the business and many more.

Intentional borrowers: While many borrowers are willing to repay their dues, some are least bothered to repay their loan installments to the bankers intentionally on account of several reasons namely:

They are not afraid of the outcome on account of non repayment of loan installments and

They may be having enough support from politicians, bureaucrats and others.

When it comes to the bankers, non recovery of loans will definitely jeopardize their interests and on account of poor recovery performance many bankers are found to be winding up their businesses.

Such case histories are greatly helpful in providing sufficient insight for the upcoming bankers and the top management available in the banks should spend some time in educating the personnel working in the recovery wings sufficiently in this direction and the successful banker is one who is able to maintain a healthy loan portfolio.

The personnel working in the recovery wing of the banks should be imparted sufficient training and they should be taught sufficiently as to how they can handle the difficult borrowers. Such an exercise on the part of the banker will go a long way in bringing more recoveries and the sound performance of any bank is judged by the recovery portfolio rather than any other portfolios.

Submitted by A. Gauri Sankar, freelance writer; trainer and financial consultant. He can be contacted through:

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