NPA management is the most important responsibility of bankers. Explain how a banker can reduce the probability of an advance turning into NPA.

The Banker and his ability to assess the customer and the loan requirement go a long way in securing an advance and preventing the same from becoming an NPA. The banker who lends funds should: Do a proper assessment of the customer. The Banker should have the ability to assess whether the customer can be trusted and will repay the amounts borrowed. He should monitor the advance and the business of customer. The major source of information for monitoring would be the operation of the current or cash credit accounts, the stock and book debts statements submitted by the client and the nature of bills submitted for collection or discount and the inspection of stocks and book debts carried out at regular intervals. The banker should have the ability to maintain friendly relationship with the customer. The customer should treat the banker as a friend to whom he can confide the ups and downs of business. To check whether the advance requested by the customer is commensurate with his needs. Regular interaction/discussion with the customer is a win-win situation for both. The banker gets an opportunity to learn about the business of the client and the customer gets benefit of the knowledge of the banker. The above are general principles for assessment. This has to be followed by a full-fledged assessment of the risks of the customer's business and how the said advance can be secured with an adequate mix of marketable and less liquid securities and how the bank can be safeguarded against unforeseen circumstances. For this he has to ensure the following: Marketability of securities Taking adequate margins Documentation The law of limitation The realization of the Advance