However, timely recovery of bank loans are important for variety of reasons and from various perspectives. From the borrower’s angle, the longer the delay in settlement, the outstanding liabilities of the borrower increase; the likely penalties may also increase with time.
From the bank’s perspective, the longer the delay in recovery, they lose the opportunity to earn income in alternative investments, the security and collateral may lose value and hence may incur capital loss as well. More importantly, the delays in recovery proceeds can lead to liquidity crisis in the bank, run on the bank and consequent failure of the bank.