It can be difficult sometimes from an outside perspective to gauge why a nationalized bank will need external consultants to identify and solve problems within the organization. But in the modern era of business, consultants are not just going to take your watch and tell you the time.
If a company has been a defaulter for more than 90 days to pay the interest or principal against the loan to the bank, the account becomes an NPA or non performing asset. This can affect the bank’s economic state to a great extent. With the support of skilled NPA management in banks provided by top consultants, banks can discover effective solutions to regain their financial stability and strength.
Reason #1: Legal knowledge
You may be surprised initially to know that big consultancy firms are earning as much as the top Indian CEOs by helping companies in insolvency proceedings. But once you delve deeper into NPA rules, you’ll realize that the legal knowledge of consultants is crucial for the bank’s profit.
- Depending on the nature of the case, consultants can suggest whether declaring bad debt is a better option than trying to negotiate and settle the debt.
- Restructuring the company is often necessary for a turnaround, and only top consultants can help with their legal expertise.
- Restructuring the company is often necessary for a turnaround, and only top consultants can help with their legal expertise.
Navigating the intricate legal processes is challenging without the guidance of professional experts, which makes NPA management in banks a crucial service for effective handling.
Reason #2: Stop loss and/or gain
When banks try every means to collect due loans from a company that isn’t in a position to pay it off, managing legal proceedings becomes a complex task. Often, banks hesitate to hire NPA consulting agencies because of their charges. However, the consultancies can actually help banks save or make more money than they spend on the services.
- If consultants succeed in NPA debt settlement at a low-interest rate, the bank ultimately gains, recovering some money instead of losing it all.
- Even if you pay a considerable sum to the consultancy, the management ensures it doesn’t negatively impact profit by suppressing the effect on ongoing business procedures.
- Thus, paying for NPA management in banks is an investment to reduce loss and increase future profit.
So consider this payment as an investment to reduce the loss and increase the profit ratio in the future.
Reason #3: Prompt response
When a company defaults, banks usually apply various tactics to recover the amount, including constant follow-ups that can hinder other business processes. However, NPA consultants take on the entire burden of communicating with the debtor.
- Consultants provide a prompt response whenever there’s an issue with the ongoing settlement process.
- The team is proactive, understanding that advanced preparation helps negotiate better with defaulters.
- The fate of the bank often rests in the hands of these consultants, and their transparent communications ensure even the smallest updates are shared, solidifying the importance of NPA management in banks.
Reason #4: Access to the experts
Hiring top NPA consultancy firms gives banks access to not only legal professionals but also an entire team of experts across various fields. The final advisory team is able to plan the best restructuring procedures for the company and accurately fix the turnaround time.
The approach to debt settlement depends on the debt’s nature and other factors involving the company.
Employing the best consultancy ensures that the team uses the appropriate approach for each unique situation, enhancing the efficiency of NPA management in banks.