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Debt collections comprise a number of processes to collect overdue loan repayments from borrowers. These mechanisms can be lengthy and complex, especially when the borrower becomes inaccessible through the primary contact details. Banks and other financial institutions at times face a huge challenge in re-establishing contact, particularly with defaulting borrowers for loan accounts. Due to this gap, the recovery time also increases, leading to poor collection rates. This is where skip tracing tools become a crucial part of the debt collection processes, helping lenders establish a reconnect with the borrower. Typically, lending institutions have to devise methods that identify and record secondary contact points of the borrower. 

Why is Skip Tracing important in debt collections?

Skip-tracing tools are crucial to ensure effective debt collections for a number of reasons. 

Firstly, they help debt collectors reconnect with borrowers who have fallen behind on their payments to resolve the situation. Financial institutions need to contact overdue debtors to provide tailored repayment options and discuss debt settlement plans, and if necessary, take requisite legal actions. 

Secondly, skip-tracing tools for collections are essential because they can help lenders prevent fraud. Some debtors may try to avoid genuine repayments by providing false information to lenders. Skip tracing can help verify the borrower’s identity and ensure the lender has established contact with the right person. 

Thirdly, lenders must comply with the regulatory guidelines defined by the regulatory authorities, such as the Reserve Bank of India.  

Skip Tracing tools and techniques

Skip Tracing tools typically include software capabilities that are designed to search through large volumes of publicly available data sources for relevant information on the borrowers. The techniques devised as a result include finding alternate phone numbers, email addresses, and physical addresses, other than confirming the borrower’s financial history and employment information. Some of the common skip-tracing techniques include:

  1. Searching public records and personal information: Debt collection agencies may search public records, such as property details, legal documents, or voter registration details, to find information about the borrower’s current location and contact information. The borrowers’ PAN number and Aadhaar ID may also be used to gather more information. The borrowers’ employers can also be contacted, and secondary contact details, if any, can be obtained. 


2. Contacting nominees and co-applicants: Lenders may reach out to the friends and family of the borrower if their details have been shared at the time of loan onboarding. This also includes reaching out to nominees and co-applicants appointed by the borrower in the loan account.

3. Digital footprint: Banks and other financial institutions may also use online platforms, such as social media, search engines, or online directories, to locate the debtor’s current location or contact information.

4. Databases and software: Lenders may use specialized databases and software solutions to locate the debtor’s current location or contact information. These tools may include skip tracing software, reverse phone number lookup tools, or address verification software.

Skip Tracing tools

It is important to note that even the best skip-tracing tools for collection are implemented within the confines of local law and regulatory guidelines. Lenders must respect the debtor’s privacy and rights, and at no point in the collections process should the lender adopt a coercive approach to recover the debt. An aggressive approach is likely to compromise the compliance protocol laid out by regulatory bodies, such as the Reserve Bank of India, in the Indian context. 

Benefits of skip tracing in debt collections

Some of the benefits of skip tracing in debt collections include:

  1. Improved recoveries as lenders are equipped with authenticated and relevant contact information of borrowers.


  1. Enhanced organizational effectiveness with streamlined outreach and greater control over agent activity. 
  2. Streamlined debt recovery efforts since lenders can rely on data and devise efficient contact strategies. 
  3. Lower cost of collections as recovery efforts are more concerted and fruitful.
  4. The lenders’ relationships with the borrowers improve since skip tracing tools help them re-establish a connection with the borrower. 
Skip Tracing tools

In the face of rising delinquencies, skip tracing will become an important mechanism for lenders to improve their collection rates. Lending institutions increasingly acknowledge the need to transition to digital channels for end-to-end collections processes, including skip tracing. Skip-tracing is becoming a digitized procedure as a significant step in recovering from at-risk or potentially delinquent loan accounts. Lenders who are able to adopt a digital approach in time to lower NPLs will be able to see the comprehensive results of digital skip tracing. 


  1. What is skip tracing in debt collections?

Skip tracing is a professional process of locating an overdue debtor who may have become untraceable after changing their location without updating the lender. When the debtor is unavailable at the primary contact details, debt collectors use methods, within the regulatory and legal framework, for reaching out to alternative or secondary contact points to locate the debtor. This tool becomes crucial when lending institutions have to recover debt from borrowers but cannot establish contact using the provided details. 

  1. How accurate is skip tracing?

Skip tracing is as accurate as the tools used to pursue the debtor. This implies that lenders must ensure that the techniques used are sophisticated, advanced, and comprehensive. When lenders use public records to search for information, achieving accurate results from a large volume of data is difficult. Therefore, lenders are slowly transitioning toward digital channels for skip tracing, where data analytics are leveraged to arrive at the secondary contact points. 

  1. Is skip tracing ethical?

The local regulatory authorities of each country lay out a framework within which lending institutions must operate to carry out skip tracing. In the Indian context, the Reserve Bank of India has laid out guidelines prohibiting coercion and prioritizing debtor privacy. These are necessary to ensure compliance, in addition to helping lenders establish a cordial, long-term relationship with the borrowers. 

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