In the pursuit of short-term goals, businesses often make decisions that, while seemingly prudent in the moment, can result in missed long-term opportunities. It’s important to maintain short-term targets, but these should serve as stepping stones toward the company’s broader objectives, not as obstacles that divert attention from the ultimate goal. Unfortunately, many management decisions, particularly in the handling of Non-Performing Assets (NPAs), reflect a shortsighted approach driven by fear of loss rather than strategic foresight.

When dealing with NPAs, financial institutions often view these accounts solely as liabilities, overlooking potential opportunities for recovery and relationship building. This narrow perspective can lead to actions that damage customer relationships and tarnish the institution’s reputation. It’s critical to remember that each customer is unique, facing different challenges and possessing varying potential for future business. A more nuanced, understanding approach can turn a challenging situation into an opportunity.

However, too often, banks disregard the value of their relationships with customers once they become less profitable. This approach not only erodes trust but also undermines the goodwill the institution has worked to build. Negative word of mouth from disgruntled customers can severely damage a company’s reputation, while a satisfied customer—one who feels supported during difficult times—can become a loyal advocate.

This isn’t about waiving off debts or excusing non-payment. Rather, it’s about seeing customers as more than just numbers on a balance sheet. Effective NPA management requires a smart, empathetic approach that considers the customer’s circumstances and seeks to maintain the relationship. Unfortunately, many institutions resort to aggressive and sometimes illegal practices, such as excessive phone calls, unannounced home visits, and even accessing a customer’s contact list without consent. These tactics not only violate legal standards but also alienate customers, making it unlikely they’ll return once their situation improves.

Moreover, when institutions act in this manner, they undermine the long-term viability of their business model. Relying on customer ignorance of their rights or a lack of alternatives is not sustainable. In fact, it’s counterproductive. Eventually, when all other tactics fail, financial institutions often revert to more reasonable and humane methods of debt resolution. But by this point, the damage is done.

The question arises: Why not adopt these sensible practices from the outset? By understanding the customer’s situation and valuing the relationship, financial institutions can foster loyalty, preserve their brand reputation, and potentially recover more of what’s owed—all without resorting to damaging tactics.

In the end, it’s about seizing the opportunity to strengthen relationships, even in difficult times. Customers who feel understood and respected are more likely to remain loyal, helping to sustain the business in the long run without the need for extensive marketing or other trust-building efforts. Financial institutions must shift their focus from short-term fear to long-term opportunity if they wish to succeed in an increasingly competitive environment.