Devising a strategy helps in achieving a set goal or objective. Recovery agents should therefore devise a strategy for debt recovery. The following guidelines would help in preparing proper strategy for debt recovery.
i) The collection process should be compliant to the bank-specific recovery norms and also regulatory guidelines.
ii) The collection timing should be synchronized to the cash inflow pattern of the debtors: For example, recovery from salaried employees should be timed when salary is received by or credited to the debtor’s account, normally at the moth-end. In case of SME borrowers the effort should coincide with cash flow on account of sales. In case a collection from agriculturist should be made, then it should be soon after the crops are sold. This will call for knowledge of bank products on the part of agents. It should be the endeavour of the agent that collection should be made well before the cash inflows are spent away by the debtor for meeting other expenses.
iii) Adopt different collection strategy for different debtor types: This is based on the dictum that ‘one size does not fit all’. In the foregoing paragraphs, three types of debtors have been described and they need different strategies for recovery success:
- Normal debtors, i.e. who ‘can pay’ and ‘will pay’ if reminded or/and persuaded to pay.
- Difficult debtors, i.e. those who ‘can pay’, but ‘will not pay’.
- Doubtful debtors, i.e. whose who can pay the reduced amount as negotiated with them.
iv) While different strategies are required for different types of debtors, the following are the common points to be followed in all kinds of recovery strategies:
- Recovery effort should start with the establishing a good rapport with the debtor. Communication, listening and persuasive skills would be applied in building good interpersonal relations.
- Go through the ‘know Your Customer’ papers furnished by the bank and know the customer’s identify and personal profile.
- Go through the copy of the loan agreement of the debtor furnished by the bank and note down the financial position, cash flow pattern, and assets charged to the bank.
v) Record in notebook recovery efforts in chronological order for each.