There are many types of loan defaulters in the country. Therefore, it is necessary to evaluate every case individually before sanctioning loans to them, and find out their history to identify whether they were willful defaulters or not. Also, we must know the previous state and current outlook of their business and measure if any additional loan will become a burden for them.
The business owners should also have alternative financing sources. They must have other industries, from where they can inject funds to their businesses that are facing trouble. They can seek help from the banks by taking loans from the stimulus packages. But it is not wise to think that they will be able to re-establish their business just with the loan money. If they do not have other means of support, they will fail.
Additionally, the banks should thoroughly check what the defaulters have done with their previous loan money, and check issues like management capacity, corruption and money laundering.
There should total professionalism before sanctioning loans from the stimulus packages, and the bankers must come out of the relationship banking method. They cannot just approve loans to everyone and create an omnibus situation. I am glad the central bank is currently monitoring these things.
The fund under the stimulus package programme is limited. If the fund is sanctioned to the willful loan defaulters, businesses that truly need money will suffer. If the money goes to the defaulters, they certainly will not be able to save their businesses, forget creating job opportunities for the people.
So I would also suggest the banks look at every case individually before they increase the loan repayment time.
Though there is still a risk in sanctioning loans to every defaulter, you cannot stop giving loans to every one of them. There might be exceptions in some cases, where the businesses were facing some ups and downs before the Covid situation, but they collapsed due to Covid-19.
The government has initiated the stimulus package for the revival of the economy. Thus, we must ensure that the fund goes to the business owners who actually need it. Otherwise it will become a burden for both the nation and the business owners.