The Benediction of a prone hand.
Bankers, Investment Bankers, Angel funding, all are into lending money to various startups, businesses, entrepreneurs, small and medium enterprises, Their acumen and skill lies in their judgement and ability to back the right horse. However,if the borrowers or businesses do not perform as per expectations, and fail to repay the loan they are deemed as NPA - Non Performing Assets. What caused this contractual breach? An error of judgement? Mitigating circumstances? Willful default? Force majeure?
These violations of trust and commitment metaphorically reflect the dynamics of relationships too. The difference is merely of the instrument. In banking, one deals with finance, whilst in relationships, the instrument of transaction is emotion. Every relationship is an emotional loan, an investment of sorts. Most borrowers are regular in their repayment. Some repay with simple interest, some with compound interest. These prime borrowers have a high credit rating (reliability and reciprocity). Some continue to pay interest even after the principle is repaid. These are like investments in blue chip stocks, with timely rights issues, dividend, bonus and yield the highest ROI (return on investment) .
Then there are these non performing assets. There might be some compelling reason for non repayment. They still remain Standard assets, in whom we continue to trust.In banking jargon, these are loans which have defaulted for a period of 12 months or less but the risk of the asset is normal. They are given the benefit of doubt, and their credibility and intentions are still not lost.
If these defaults continue, their rating drops to sub standard assets. These relationships have continued to default beyond a reasonable period of time. Banks classify these NPAs as those having dues for more than 12 months. They have a significantly higher risk level. Banks offer a "haircut relief" (reduction in market value and reduction of interest rates) to such NPAs because they are less certain that the borrower will eventually repay the full amount. In relationships, we accept this limitation of servicing the loan and extend our tolerance and acceptance as "haircuts'. We attribute their non compliance to idiosyncrasies, vagaries, circumstances, giving them a long rope.
The next category is a lot less reliable. The Doubtful Debts. Non-performing assets in the doubtful debts category have defaulted for more than18 months. They raise serious doubts about the borrower. He might never repay the full loan. The doubtful debt category in relationships is where the trouble begins. The realisation, that one has invested heavily, and there seems to be no return over an uncomfortably long period. There is a despondency, a sense of having been let down with a growing trust deficit. There is an element of self castigation, for erroneous judgment. Often times, these kind of borrowers not only default on payments, but expect bailout packages. It's a no win situation. You are a fait accompli, a sorry collateral damage in their sagging fortunes, and at times are coerced into lending more, with full realization of the futility of patching a sinking ship. These relationships are a huge drain of emotional resources. Dead investments, with negative returns. And finally, there is this category of Loss Assets. They are loans that are written off. They might be wilful defaulters, or very rarely candidates eligible for evoking the Force Majeure clause. Helpless and beyond redemption.They do not figure in the account books of our emotional balance sheets. They are the unavoidable professional hazards of this lending and investing business. Raises serious doubts about remaining in this lending business. No matter how determined I am to stop extending emotional loans and investing in emotional bonds, I realize, that I'm an incorrigible optimistic lender with the benediction of a prone hand. I cant stop lending. I force myself to look at some of the blue chip stocks, that have yielded incredible returns as my prone hand and mind dishes out the next loan. Emotions or finances, business must go on profit or loss notwithstanding.
Dr Deepak Ranade.
Bankers, Investment Bankers, Angel funding, all are into lending money to various startups, businesses, entrepreneurs, small and medium enterprises, Their acumen and skill lies in their judgement and ability to back the right horse. However,if the borrowers or businesses do not perform as per expectations, and fail to repay the loan they are deemed as NPA - Non Performing Assets. What caused this contractual breach? An error of judgement? Mitigating circumstances? Willful default? Force majeure?
These violations of trust and commitment metaphorically reflect the dynamics of relationships too. The difference is merely of the instrument. In banking, one deals with finance, whilst in relationships, the instrument of transaction is emotion. Every relationship is an emotional loan, an investment of sorts. Most borrowers are regular in their repayment. Some repay with simple interest, some with compound interest. These prime borrowers have a high credit rating (reliability and reciprocity). Some continue to pay interest even after the principle is repaid. These are like investments in blue chip stocks, with timely rights issues, dividend, bonus and yield the highest ROI (return on investment) .
Then there are these non performing assets. There might be some compelling reason for non repayment. They still remain Standard assets, in whom we continue to trust.In banking jargon, these are loans which have defaulted for a period of 12 months or less but the risk of the asset is normal. They are given the benefit of doubt, and their credibility and intentions are still not lost.
If these defaults continue, their rating drops to sub standard assets. These relationships have continued to default beyond a reasonable period of time. Banks classify these NPAs as those having dues for more than 12 months. They have a significantly higher risk level. Banks offer a "haircut relief" (reduction in market value and reduction of interest rates) to such NPAs because they are less certain that the borrower will eventually repay the full amount. In relationships, we accept this limitation of servicing the loan and extend our tolerance and acceptance as "haircuts'. We attribute their non compliance to idiosyncrasies, vagaries, circumstances, giving them a long rope.
The next category is a lot less reliable. The Doubtful Debts. Non-performing assets in the doubtful debts category have defaulted for more than18 months. They raise serious doubts about the borrower. He might never repay the full loan. The doubtful debt category in relationships is where the trouble begins. The realisation, that one has invested heavily, and there seems to be no return over an uncomfortably long period. There is a despondency, a sense of having been let down with a growing trust deficit. There is an element of self castigation, for erroneous judgment. Often times, these kind of borrowers not only default on payments, but expect bailout packages. It's a no win situation. You are a fait accompli, a sorry collateral damage in their sagging fortunes, and at times are coerced into lending more, with full realization of the futility of patching a sinking ship. These relationships are a huge drain of emotional resources. Dead investments, with negative returns. And finally, there is this category of Loss Assets. They are loans that are written off. They might be wilful defaulters, or very rarely candidates eligible for evoking the Force Majeure clause. Helpless and beyond redemption.They do not figure in the account books of our emotional balance sheets. They are the unavoidable professional hazards of this lending and investing business. Raises serious doubts about remaining in this lending business. No matter how determined I am to stop extending emotional loans and investing in emotional bonds, I realize, that I'm an incorrigible optimistic lender with the benediction of a prone hand. I cant stop lending. I force myself to look at some of the blue chip stocks, that have yielded incredible returns as my prone hand and mind dishes out the next loan. Emotions or finances, business must go on profit or loss notwithstanding.
Dr Deepak Ranade.
No comments:
Post a Comment