|
C O N T E N T S Down
but not out Red
alert A
vote for the future Making
the elephant dance Round
Table Overcoming
obstacles Database |
[Page 2] Other changes are also happening. Till a couple of months back, 25-year old Sanjeev (name changed), working at the call-centre of a Mumbai-based recovery agency, used to argue with a borrower when he was told that the payment would be made when he has the necessary liquidity. Now, he has to quietly end this conversation. Then, visiting consumers after a deadline of seven in the evening was a common occurrence earlier. Now, it is a strict no-no.
“The attention on recovery has acted as a dampener for normal on-field recovery efforts. If earlier the efficiency in recovery was 95 per cent, in the last few months it is at 88-90 per cent,” says the retail head of a private sector bank. There are also a lot reluctant bank officials and recovery agents who were earlier sent to repossess cars or two-wheelers on default. “Sixty days before repossessing a vehicle, banks do send an intimation letter to the local police station informing them about the default case details and the time when the bank will repossess the vehicle. However, the police have so many other things to do that these intimation letters are usually thrown in the dustbin,” says Manish Desai, senior partner, Paras Kuhad & Associates, a law firm. Also, with borrowers filing police complaints against the bank officials and recovery agents alleging use of abusive methods for repossessing vehicles, banks are wary. “The entire process of repossession of vehicle has become difficult and tedious after the recent incidents of abuse by recovery agents. But we have not stopped the process. If we stop, we will have to shut the business,” says a senior HDFC Bank official. Many banks have been forced to review their loan policies to pre-empt further escalation of the problem. The first measure they are taking is exiting the subprime business where borrowers belong to economically weaker sections with a monthly income of around Rs 5,000 and pay interest rate as high as 45-50 per cent on loans ranging up to Rs 50,000. At present, banks and non-bank finance companies (NBFCs) have an exposure of almost Rs 45,000 crore in the subprime market. Leading private sector banks such as ICICI Bank and HDFC Bank have already exited this business while Citigroup has tightened its lending procedures. The bank has made face-to-face interactions with customers mandatory.
More data with organisations like the Cibil (Credit information bureau of India) will be a great help for the banks in identifying tainted customers. The available data already reflects that in the last couple of years there have been indications of overleveraging of borrowers, especially in the small ticket sized loans. This could mean some more pain for banks.• Business Standard • December 2007 |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
