Banks were never so serious in their efforts to ensure timely recovery and consequent reduction of Non-Performing Assets (NPAs) as they are today. It is important to remember that recovery management, be of fresh loans or old loans, is central to NPA management. This management process needs to start at the loan initiating stage itself. Effective management of recovery and Non-Performing Assets comprise two pronged strategy. First relates to arresting of the defaults and creation of NPA thereof and the second is to handling of loan delinquencies. The tenets of financial sector reforms were revolutionary which created a sense of urgency in the minds of staff of bank and gave them a message that either they perform or perish. The prudential norm has forced the bank to look into the asset quality. A debt from a loan, credit line or accounts receivable that is recovered either in whole orContinue reading
Business Finance
Business Finance is that business activity which is concerned with the acquisition and conservation of capital funds in meeting financial needs and overall objectives of business enterprises.
Case Studies on Debt Recovery Management
Case Study 1: HDFC Bank Recovery Mr.Kaushik Agarwal, about 18 months back had purchased 1 Tata Indigo, financed by HDFC bank. His EMI for this month (May’08) was bounced due to some reasons. The recovery person called him on the 22nd May for the payment of the same. He was out of town at that moment so Mr.Kaushik had asked him to send someone to his office on the 24th to collect cash. Now on 24th it slipped out of Kaushik’s mind that he had to pay cash to HDFC Bank and hence he did not withdraw any cash from the bank. As it was a Saturday so when the person came for collection, he requested him to come on Monday, as the bank was already closed for the day. On this the person, who had called Kaushik earlier on the 22nd, called him again and started shouting at himContinue reading
Functions of Debt Recovery Agents
The core function of a debt recovery agent is to collect dues/receivables from specified debtors of the bank as per agency agreement entered with the principal. Remitting the collected funds to principal, keeping account of the receivables collected and yet to be collected and reporting the position and developments to the principal are essential but ancillary to the core function. All these functions will be specified in most agency agreement and would require to be accordingly discharged by the debt recovery agent. Apart from the easily collectible receivables, most banks have on their books over due receivables from debtors who are not traceable, or who show unwillingness pay or who resist surrendering the security charged. In such cases, the recovery process is difficult and requires handling by specialized collection agencies to process the required expertise. The functions of re-processing the security, initial legal action and tracingContinue reading
Debt Recovery Agent
The phrase “Debt Recovery Agent” comprises three terms- Debt, Recovery and Agent. Let us understand the meaning of these terms separately, before we explain the meaning of Debt Recovery Agent. Debt: It refers to a sum of money owed by one person or entity (debtor) to another person or entity (creditor). Thus there are two parties to a debt- debtor who receives money by way of a debt; and creditor who lends money to the debtor. To illustrate, if Ram takes a loan of Rs. 3 lacs from a bank for purchasing a car, Ram becomes the debtor (or borrower), the bank is the creditor (or lender) and the loan of Rs. 3 laces is the debt (principal). Ram would be required to repay the loan in equated monthly installment (EMI),comprising the principal and interest, spread over the repayment period of, say, 3 years ( debtContinue reading
Modes of debt recovery other than normal debt recovery procedure
(1) Where a certificate has been issued to the Recovery Officer under Sub-section of section 19, the Recovery Officer may, without prejudice to the modes of recovery specified in section 25, recover the amount of debt by any one or more of the modes provided under this section. (2) If any amount is due from any person to the defendant, the Recovery Officer may require such person to deduct from the said amount, the amount of debt due from the defendant under this Act and such person shall comply with any such requisition and shall pay the sum so deducted to the credit of the Recovery Officer: Provided that nothing in this sub-section shall apply to any part of the amount exempt from attachment in execution of a decree of a civil court under section 60 of the Code of Civil Procedure, 1908 (5 of 1908). (3) (I) The RecoveryContinue reading
Normal debt recovery procedure followed by banks
Normal debt recovery procedure will generally apply to the debtors who are willing to pay the dues with normal recovery process. Based on the regulatory guidelines of procedure of tribunal on debt recovery, following procedure may be outlined for such recovery. However the recovery agents should follow the bank-specific debt recovery procedure as advised by their principal. Below are given the main rules for making telephone calls and visit to the debtor for recovery of dues: 1) The recovery agent has been authorized by the bank to collect the past due debt from the particular customer. 2) The customer has been notified by the bank of the details of the recovery agent for collection of the past-due debt. 3) Making customer calls: This is the first step in recovery procedure and following rules should be followed generally: Calls are madeContinue reading