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Debt Collection in India Why Is It So Difficult

Debt collection in India faces several challenges. There is a lack of real-time collaboration between collectors and borrowers, which makes it difficult for collectors to create customized collection plans tailored to each borrower's unique financial situation. Additionally, the collection industry has failed to adapt to mobile technology trends. Records are also often out of date, leading collectors to bother people who have already paid off debts. Overall, the debt collection process in India has not evolved with the changing business environment and needs innovations to improve efficiencies and adopt a more customer-centric approach.

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Soumiki Ghosh
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229 views

Debt Collection in India Why Is It So Difficult

Debt collection in India faces several challenges. There is a lack of real-time collaboration between collectors and borrowers, which makes it difficult for collectors to create customized collection plans tailored to each borrower's unique financial situation. Additionally, the collection industry has failed to adapt to mobile technology trends. Records are also often out of date, leading collectors to bother people who have already paid off debts. Overall, the debt collection process in India has not evolved with the changing business environment and needs innovations to improve efficiencies and adopt a more customer-centric approach.

Uploaded by

Soumiki Ghosh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Debt Collection in India: Why is it so Difficult?

The difficulty in money recovery and uncertain cash flow is a huge deterrent to businesses in
India, rendering entire business environment ineffective and pulling down India’s score in the
Ease of Doing Business Index released by the World Bank. With regards to the recovery of
debts, there are certain problems faced by the debt collection agents which need to be addressed
by the Government at the macro level.

One of the major roadblocks in the process of debt recovery is the absence of real-time
collaboration between the borrower and the collector. Every debtor’s repayment abilities are
unique owing to differences in their financial backgrounds, which require collectors to create
customized collection plans. But due to frequent communication breakdowns, this is made very
difficult. All of this not only results in a long, complicated and incomplete collection process but
also hinders them from offering smooth customer experience. 

The collection industry has failed to keep up with the technologically advanced mobile
generation of today. Research indicated that most borrowers or indebted population depend on
mobile devices as they are on-the-go, but the industry has not been able to optimize debt
collection policies in tandem with this growing trend..

Many times collectors end up calling debtors who have long paid off their debts, just because
their records are not updated for the same. Again, an ineffective communication process is to be
blamed. Not only are the debtors bothered for no reason, but the collection agents lose out on
important time which could have been invested in contacting real recovery opportunities.

Customer bankruptcy is the ultimate disaster recipe. There is no guarantee of recovery of money
anytime soon. The recovery process depends upon the terms and conditions of the contract
entered into. Most times, collateral is kept against the debt given. The lender has the right to
receive money after attaching the assets or getting the collateral in possession. However, a
customer going bankrupt is a huge blow to the collection agent, as debt recovery then is a long,
tedious process.

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The debt collection process has not kept pace with the changing business environment and
continues to function as they have been handed down for decades. There is no proper
segmentation done for the customers. Income-wise segmentation is not enough. The collection
agencies need to dedicate resources to analyze a customer and his income bracket. They tend to
bring all the debtors under one broad category, which proves to be inefficient.

Not all debtors turn bad, in fact, most of them are capable of paying back their dues with just a
little hand-holding like offering assistance or motivating them properly. But most debt collection
agents are not provided with appropriate tools to analyze customers in the right manner, due to
which find themselves at a loss to provide flexible payment arrangements. They are not equipped
with the right tools to picture debtors as customers and then proceed to recover money from
them.

The collection industry as a whole is in dire need of innovations to recover bad loans and
improve the inefficiencies in the system. There is an important need for a customer-centric
approach to the whole process.

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