Each and every individual working in any sector wants to earn money and the companies that lend money (loan) to such individuals for various purposes are no different. Banks and NBFCs (lenders) grant loans to individuals and businesses, known as the borrowers, for a fixed period of time. These borrowers are required to repay the loan within the repayment cycle span. But some borrowers do not pay within the timeframe and are thus called defaulters. debt collection agency in India These defaulters become non-performing assets (NPA) or bad debts for the financial institution thus harming the regular working activity of the institution. In order to have a balanced balance sheet and no bad debts in the books of the institution, the banks and NBFCs often try other ways for legal recovery of these loan amounts from the defaulters. In order to make money/gain profit, it is imperative for lending companies to formulate prudent and well-considered strategies, as to how the recovery of debt ought to take place for maximum/full recovery of debt from their borrowers. As one of the main sources of income for these financial institutions/companies is from the interest and other charges levied upon the amount lent to a borrower. A careful and well-planned loan recovery platform strategy will save time and will help in cost reduction as well as maximize resources. In case, the loan recovery platform or online collection services fails to recover the debt after legally using every means necessary, the bank and NBFCs could always opt for legal action and engage recovery lawyers as a last resort against the defaulters. Although it is an expensive and time-consuming process, therefore, the banks and NBFCs along with or Debt Collection Agency in India must come up with such strategies that will result in a recovery of debt thereby making a win-win situation for both. One of the strategies used by most of the banks and NBFCs is the appointment of a third party called ‘Debt Collection Companies in India or Debt/Loan Recovery Agency’ to help in expediting the recovery process.
A Recovery agency/ collection agency is usually a third-party agency that is appointed by a bank/NBFC to collect loan dues from account holders in such banks or NBFC for a fee or a percentage of the total amount owed. The collection of loan money through recovery agents of a Recovery agency/ collection agency is an age-old practice followed by banks and NBFCs. These recovery agents are hired by the banks and NBFCs to collect the loan amounts from the borrowers. One of the purposes other than speedy loan recovery is that the banks and the NBFCs could fixate their attention and put efforts in other sectors as well to gain more profit and could cover other sectors. In addition, the banks and NBFCs are required to look over various fields too which is quite a hassle as it is strenuous for the banks and NBFCs to know everything about every field they are overlooking. Therefore, in order to avoid such hassle, the banks and NBFCs appoint the best collection agency to make their work easy and hassle-free. Although the appointment of a debt/loan recovery agency or collection agency is a common practice exercised by banks and NBFCs, sometimes such banks and NBFCs have their own dedicated recovery team whereby they are not required to outsource the debt/loan recovery agency or collection agency.
The strategies such-appointed debt/loan recovery agency or collection agency should adopt are:
1. Details of Borrower:
Each and every detail which will help to remain in contact with the borrower must be kept, stored, and updated in the system database of the respective banks and NBFCs. In some cases, the debt recovery agency or collection agency may even procure details of a relative or a friend of the borrower from banks and NBFCs. The debt/loan recovery agency or collection agency needs to ensure this because in case the borrower decides to move away without informing, the debt/loan recovery agency or collection agency will have a way to reach out to such borrowers.
2. Reminder of Payment; Automated and telephonically both:
This is a digital phase and most of the banks and NBFCs have their own application that makes it easier for the borrower to remain up to date with the date of payment among other necessary things. But it is not certain that a borrower will always know how to use the application, therefore, the debt/loan recovery agency or collection agency must send an automated reminder of payment via any mode (email/text message) whichever is most likely to reach the borrower. The reminder must not just be limited to automated reminders rather telephonic reminders are of paramount importance as well, as the borrower may or may not check their text messages from time to time.
3. Follow up Call after Reminder:
A follow-up call after a reminder is a must in case the borrower has not paid up their respective dues. When a follow-up call is made the borrower must be informed/reminded politely regarding the consequences of not paying the owed amount on or before the expiry prescribed date of payment.
4. Keep Track of borrower’s payment Behaviour:
The debt/loan recovery agency or collection agency needs to remain up to date with the borrower’s payment pattern and filter out the delinquent borrower. Delinquent borrowers are the habitual defaulters and are required to be dealt with accordingly and such borrowers may need a little more attention to ensure recovery.
5. Prioritization of Collection:
It is important to focus on those borrowers that need attention before all others. For instance, borrowers that have kept payment on hold, have a long list of broken promises, have large outstanding amount, etc. Moreover, it is essential for banks and NBFCs as well as the debt collection agency to have a cent percent recovery, however that may not be the case always. Therefore the recovery of debt or money collection agency must prioritize such borrowers whose loan amount is on the higher side because the higher the loan amount, the higher the interest amount will be recovered from the borrower. Subsequently, higher will be the profit margin of the recovery of debt.
6. Dedicated Collection Team; Code of Conduct:
Since the main source of earnings of Banks and NBFCs is the loan recovery it is more likely that the debt/loan recovery agency or collection agency will remain updated with the latest amendments made legally or otherwise. The Banks and NBFCs must be cautious and beware of such collection agencies that go beyond the scope of code of conduct of debt loan recovery agency or collection agency to recover the debt. The bad debt collector or collection agency business must follow the prescribed code of conduct for the collection of debt to the utmost sincerity.
7. Customized Dashboard:
It is more efficient to procure data from one source instead of collecting data from various sources. Therefore it is recommended to appoint a tech-driven commercial debt recovery or collection agency having the topmost and state-of-the-art loan recovery/collection software for debt collection through which such debt recovery agency or collection agency could create a customized dashboard as per the requirements of the banks and NBFCs so that each time an agent calls a borrower for recovery, then he/she does not have to look for contact details, history and other information from various other sources. The customized dashboard will give all the necessary information and details of the borrower in only a few moments. The agent can even add the gist of the conversation for every borrower he/she contacted.
8. Legal Team & Tech Team:
There are some debt recovery agencies or collection agencies that even cover the legal aspect of the recovery business apart from the loan recovery. Such a debt recovery agency or collection agency does not outsource recovery lawyers rather they have their own in-house legal team which looks over such recovery cases/defaulters against whom a legal action is required to be taken. There are debt agency or collection agencies that provide recovery and collection software which is helpful to the collection agents as well as the legal team. As such agencies also outsource or have their own dedicated tech team that provides such a platform that synchronizes the data, provided by the banks and NBFCs to recover debt, as a result, such synchronization makes the work of the recovery agents and legal team easy and less time-consuming.
Debt recovery services are a major issue for financial institutions and the tools and techniques used by such institutions need to be properly strategized. A company, whether it’s either a bank/NBFC or money recovery agency/collection agency, must consider and implement well-thought and goal-oriented strategies that will help in full recovery of debt lent to the customers. Although the company must also ensure that the strategies which are being used do not have any loopholes which may backfire at a later stage. Such companies must always remain up to date with the latest amendments, technology made in the field of recovery of debt. The amendments could be regarding the laws governing the loan recovery by virtue of judgments of the eminent jurists of the Supreme Court and High Courts or enactment of new laws for the betterment of society at large. As far as the technological field is concerned, the company must have top-notch legal software for loan recovery which makes the work done by the loan recovery agents and recovery lawyers prompt, efficient, and goal-oriented. In the end, merging three very different sectors i.e loan recovery software, legal and technical, with a common goal to recover debt from the respective borrowers, the result will be very significant and promising. In this digital phase, if a collection agency merges the above-mentioned sectors then such an agency would be considered as one of the best collection agency, having ground-breaking and prominent debt recovery results.