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(^422) Financial Management
attractive to the investor, no company can afford, even if it were possible, to trade
entirely on owned funds, nor rely too heavily on borrowed funds. There has thus to be
a balance between the twoówhat the company provides and what it borrows.
Problems in Implementing Tandon Committee Report
The Reserve Bank of India in its notification dated August 21, 1975 considered some of
the main recommendations of the Group and advised the banks accordingly. The scheme
was required to be implemented at the micro-level where advances were made to the
borrowers. But a thorough understanding of the scheme required knowledge about the
analysis of financial statements and credit appraisal by the officers at branch level.
This knowledge was slowly spreading and till the officers at the grass root level were
equipped with the basic knowledge of credit appraisal, the implementation was bound
to be quite slow.
Another problem was that of gearing the attitudes of the bankmen to this new scheme
being something new as being not in the routine nature of credit appraisal, it was difficult
task to kindle the interest of the staff to study the Tandon Scheme for enforcing it in the
case of big industrial customers. In addition, the new scheme also called for in-depth
knowledge about each industry and various units in each industry so that the norms
could be realistically applied in each case to determine the level of current assets,
working capital gap and the style of credit.
Itís not only the bankers but also the customers were required to be trained in
understanding the implications of the norms and the quarterly information system, an
innovation brought in by the Tandon Committee. No doubt the big parties had the qualified
staff to give the data in forms prescribed on quarterly basis, but these forms were not
forthcoming in time. If they were submitted each time after the current quarter or even
much later upon reminder, the very purpose of calling for quarterly data were to be
defeated as in that event follow-up supervision and control were difficult or not possible.
In the case of some of the big parties, it had been found that they were run like family
concerns on partnership or proprietary basis and they did not maintain proper books of
accounts. Such parties were likely to plead inability to furnish the data as per the Tandon
form. To make matter worse or difficult for banks, they maintained account in regional
language too. Even if the forms were coming with lot of persuasion and understanding
from the borrowers, it was difficult to convince them in individual cases to abide by the
norms for carrying current assets if they were already above the norms. No doubt,
ultimately it was the bankerís judgement that should prevail in credit decisions after a
dialogue with the parties, but in super-imposing such decisions over the customersí
judgement, there was likely to be misunderstanding or clash sort of thing with the
borrowers. It was quite possible that aggrieved borrowers getting lesser limit might
perhaps consider higher limits.