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Most Effective Borrower-Focused Loan Collection Models: Credgenics

By CNBCTV18.COM STI (Update)

The Reserve Bank of India (RBI) has recently issued guidelines for banks and non-bank financial companies (NBFCs) regarding loan collection practices. With reports of harassment and intimidation from debt collectors on the rise, the latest guidelines are a welcome move for borrowers and consumers alike.

But why has the loan recovery process always been strewn with pitfalls?

Loan recovery is traditionally a low-tech operation. The use of loans accelerated during and after the pandemic, putting massive pressure on the stimulus mechanism. With millions of accounts – from credit cards to home loans – manually processing borrower data is a daunting task.

According to some banking professionals, when it comes to product innovation, only loan products see innovation; recovery is usually slow, manual, and inefficient. Lenders would not want to invest more in the recovery, because it makes loans less viable.

However, technology is changing the rules of the game, and for the better.

According to Rishabh Goel, CEO and co-founder of Credgenics, a digital debt collection platform, “Debt collection remains a manual process, leading to lost collections, increased human error and time-consuming operations. Typically, standard recovery approaches are applied en masse without a targeted, personalized, and segmented approach, resulting in inefficiencies. »

The collection space in developed markets like the US and UK is more mature, with banks and large financial institutions exhibiting extensive capabilities to manage overdue debt internally up to 90 days (days past ) DPD or more. Debt managed must comply with strict requirements set by regulators for customer contact and engagement.

But Asia and India are catching up.

Goel said: “In recent years, Asia has seen breakthrough growth and innovation, especially in banking and financial services. With appropriate use of technology and with the help of machine learning, artificial intelligence and automation, a data-driven approach helps lenders analyze the underlying patterns of consumer segments, to refine existing strategies to respond to individual consumer behavior and to predict the likelihood of collecting a customer’s receivables by setting a framework of necessary actions. Research shows that such a data-driven approach in loan recovery increases loan recovery while reducing the cost of collections.

Taking a customer-centric approach to loan recovery works well both for the industry and for improving the credibility of the finance and fintech industry. The new guidelines will help the industry grow in the long term. Goel added: “Current progress in India in governance of collection processes to avoid customer harassment is a step in the right direction. Keeping the borrower at the center and developing policies for fair treatment of genuine defaulters is the need of the hour. A robust mechanism to raise awareness of maintaining credit profiles with timely payments and avoiding defaults will go a long way in enhancing compliance. »


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