BANKERS: COMMECIAL WISDOM Vs. COGNITIVE DISTORTION

ALL OR NOTHING SYNDROME DESTROYING COMMERCIAL VALUE

Cognitive distortions refer to thoughts which forces individuals to perceive reality inaccurately. As per Beck's cognitive model a negative outlook on reality is a major factor in symptoms of emotional dysfunction and poorer subjective well-being. Specifically, negative thinking patterns cause negative emotions.

All-or-nothing thinking is one of the many negative thought processes, known as cognitive distortions.

This cognitive distortion occurs when any judgment is based on only a portion of the information while disregarding all other information. These kinds of all or nothing beliefs can be highly detrimental to the health of our Banks as well as the economy. All-or-nothing thinking is problematic in many ways. It's limiting and "creates extreme and impossible expectations." This type of faulty thinking can also include an inability to see the alternatives in a situation or solutions to a problem.

IB Code was introduced as a path breaking initiative to resolve the burning issue of large NPAs in the Banking System and empowered the Bankers to get in the Driver's seat and quickly resolve and revive the stressed Companies. A very high degree of trust was placed in the Bankers as members of COCs to decide the future of stressed Companies and maximise value thereof for the benefit of all stakeholders including themselves.

We are well aware of the power of Positive Thinking and reviving a Company in distress requires a positive mindset and analysing all available options and deciding in favour of maximising the enterprise value. There is no room for procrastination and any delay in decision making not only destroys value but also makes revival that much more difficult.

However, despite the stress on revival as against recovery, our bankers continue to focus on recovery through all means with IB code being treated just another tool for recovery which is totally against the preamble of the Code. They have also refused to understand the onus cast on them as COC members to work towards revival of the companies. This opposition to change has been one of the chief reasons for our failure to benefit from the revolutionary IB Code.

In most cases, a company referred for resolution under the IB code is already NPA in the books of Bankers and as per existing practice, Banks shift all such accounts to their Stressed Asset Management Group which acts as the Morgue and used for recovery like harvesting of organs before the funeral. They do not have the required mindset for even running a company forget revival since supporting an operational Company is not their cup of tea.

The IB Code requires the patient to be admitted to the ICU for special care which should lead to revival of the company. The moot question is How could the Company ever be revived if people entrusted with revival are only looking for doing a post mortem instead of a timely open heart surgery to save lives.

The ALL or NOTHING Syndrome prevents the Bankers from taking a practical view of the situation and revive the Company based on applicable ground realities in each situation and in their zeal to maximise recovery they actually kill the golden goose, and also destroy the wealth of the nation.

Recognising the change brought in by the IB Code, Bankers need to form a special vertical within the Bank just like, personal segment, mid corporate group, Large Corporates / CAG, Stressed Asset management group for handling companies undergoing CIRP under the IB Code which could be called as Corporate Restructuring/Revival Group. This group needs to be manned by people with Corporate Credit background and having a positive mindset. Adequate safeguards need to be built in the system to prevent any misuse as well as provide adequate protection for decisions taken based on their commercial wisdom some of which are bound to go wrong in few years' time.

This would go a long way in revival of most companies in distress and prevent Banks from booking large losses. Aiming for the moon is very good but then being imprisoned in self created Wish List Syndrome is fatal. For reducing the Bloating NPAs, industrial revival and employment generation, our Bankers need to stop Procrastinating, act faster and set in motion a decision making process based on Commercial Wisdom instead of Personal Prejudices.