Walk into any bank or NBFC office during a crisis, and you’ll notice the tension isn’t only about numbers. People sit around tables, not just crunching loan recovery spreadsheets, but wrestling with nerves, regrets, hope, and sometimes a touch of pride. The truth is, every problem asset isn’t simply a financial headache, it’s a deeply human puzzle. Everyone in this business whether on the lending or borrowing side, has a story. There are seasoned loan officers who trust their instincts more than any automated risk assessment tool. I’ve met managers who, in private, admitted that their sense of optimism sometimes overruled their better judgment. It might be a borrower who, in the face of increasing losses, wagers on a long shot in the hopes that things will improve. NPAs are shaped by these events much more than by any formal circular or compliance checklist.

Hidden Human Habits Behind Bad Loans

Think about the conversations around new credit approvals. There’s always someone who wants to play it safe, but who among us hasn’t seen “groupthink” in action? One dominant voice in the room, everyone nodding in agreement, and then six months later, that consensus decision turns into regret. Does anyone ever admit, "Maybe we missed something obvious because nobody wanted to stand alone?" Even borrowers fall into patterns that anyone outside finance would recognize instantly: postponing tough decisions, avoiding conflict, hoping a small payment today pushes bigger worries onto tomorrow.  Lenders postpone tough actions too. I’ve seen teams hold back, waiting for a “better time” that never arrives. Sometimes, the story behind a delinquent asset is as simple as two people unable to have an honest conversation about failure.

Conversations That Shift Outcomes

Resolution isn’t just about sending notices or calculating asset value. It’s about genuinely listening to everyone at the table.  That’s where behavioural insights really matter. The most successful bankers and the happiest borrowers are the ones who open up, talk honestly, and face discomfort together.  A recovery never starts with threats or legal jargon. It begins with empathy and real dialogue. The moment someone says, “Let’s figure this out for everyone’s sake,” walls start coming down. Suddenly, options appear that no spreadsheet could predict. Sometimes one sentence makes all the difference: “We’re not here to argue; we’re here to fix this together.”  I’ve seen borrowers go from defensive silence to genuine openness. Solutions that seemed impossible start to feel reachable.

Beyond Numbers - Banking Emotion

Every asset on the books has its own emotional shadow. Bankers hate acknowledging losses, it feels like personal failure.  Borrowers dread being labelled as “defaulters.” But accepting hard truths is actually the first step toward real outcomes.  Have you ever found yourself procrastinating? Bankers do it too, putting off tough provisions or uncomfortable write-offs because it just feels better to wait.  It’s natural. But once decisions stop being delayed, opportunities for creative solutions often emerge.

The Small Nudges That Transform Recovery

In recent years, more lenders are experimenting with subtle but powerful nudges. Not threats- gentle reminders, honest calls, mailers that say, “We know times are tough,” rather than “Your loan is overdue.”  The response to kindness can be remarkable. Borrowers are more willing to talk, negotiate, and even accept compromise. I still remember a negotiation over a small business loan that had turned sour. The banker moved past forms and formalities, asking, “Can you share what’s actually happening at your shop?” When the business owner opened up about cash-flow messes and sleepless nights, the recovery team designed a plan that worked for both. Maybe the numbers didn’t look perfect at first but the loan stopped being an NPA, and a future partnership was saved.

Training That Actually Changes Behaviour

The real goal in financial institutions isn’t just ticking off compliance boxes, it’s teaching people to spot their own blind spots. Role-play exercises, scenario training, even just sharing stories across teams: these make a difference. People start questioning their routine habits and realize they have more choices than they thought.  And it’s not just about staff. Organizations that celebrate honesty and encourage risk-taking (in conversation, not lending!) find their teams become more resilient, nimble, and open to change. The institution builds a reputation not just for recovery rates, but for treating people like people, not figures on a balance sheet.  A new emphasis on NPA funding is often part of this process, helping to find innovative solutions for troubled assets.

Seeing Opportunity in Every NPA

Whenever an asset goes bad, there’s pain. But there’s also a chance to reinvent, to forge stronger relationships, and to rebuild trust sometimes with lessons that last a lifetime. Behavioural science, despite its academic sound, is really about remembering that every financial transaction is essentially a human story. The next time you encounter an NPA, remember who produced the documentation. Rather than condemnation or fear, solutions start with empathy, curiosity, and a willingness to re-evaluate. When we return to the table with our complete selves - flaws, hopes, and sincerity, the best results occur.  NPA funding can be a valuable tool in this process, providing the necessary capital to implement creative solutions.

Written By:
Karishma Meena, Analyst
LinkedIn
Credit Curators