The Hindu Business Line : HDFC Bank fine-tunes recovery strategy

A sudden escalation in the number of incidents involving forceful re-possession of assets from loan defaulters has led HDFC Bank to debunk what are being seen as popular myths stemming from some of the trends concerning both lenders and borrowers.

The bank, which is essentially basing its arguments on a code of conduct binding recovery agents, is pointing to instances of wilful default, which it has come across quite frequently. In many other cases, however, non-payment of instalments is a result of temporary compulsions faced by loan-takers.

Wilful Defaulters

HDFC Bank, observed Mr Ravindra S. Rao, Senior Vice-President and Head-Retail Collections, has tried to institute a transparent system, one that aims to separate wilful defaulters from genuine cases. The idea, he added, is not to harass customers who have not paid their EMIs. However, the stress is on recovery — an aspect that the bank must take care of in the course of its day-to-day business.

“We do take legal action, including what is permitted under the Securitisation Act,” Mr Rao told newspersons on Friday with reference to the 20,000 or so legal cases that are pending. Incidentally, more than 15 recovery agencies have been ‘blacklisted’ by HDFC Bank in recent times.

The comment nevertheless assumes significance in the backdrop of what is being considered as increased use of violence. The bank is aware of recent incidents involving re-possession of assets, many of these being well-publicised happenings. Recovery agents, nevertheless, are not authorised to use their muscle-power, it has pointed out.

Collection Initiative

HDFC Bank has in this context underlined that recovery agencies (a section of which are law firms) are an “outsourced service,” triggered by a need to reach out to customers at all levels.

However, it appreciates the fact that a customer may well face serious and personal issues, one or more of which can lead to defaults. Temporary shortage of liquidity — often because of a brief downturn in business — is a major grey area.

The bank, as part of its collection initiative, tries to identify the reasons for delinquency, following which a case is referred to the field for further processing.

More Stories on : Non-Performing Assets | Private Banks | HDFC Bank Ltd

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