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Recovery Management

The document discusses customer relationship management (CRM) implementation in the Indian banking sector. It states that while some major banks are using CRM products, the overall CRM market in India remains nascent. Banks have not seen big results from CRM solutions likely due to improper implementation. Falling interest rates are prompting banks to look for additional non-interest business, increasing the need for CRM to build and retain customer relationships.

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Ashima Kakar
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142 views5 pages

Recovery Management

The document discusses customer relationship management (CRM) implementation in the Indian banking sector. It states that while some major banks are using CRM products, the overall CRM market in India remains nascent. Banks have not seen big results from CRM solutions likely due to improper implementation. Falling interest rates are prompting banks to look for additional non-interest business, increasing the need for CRM to build and retain customer relationships.

Uploaded by

Ashima Kakar
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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One industry best studied for Customer Relationship Management

implementation is the Indian Banking and Financial Services Sector,


which has the highest growth potential. Banks such as ICICI bank,
HDFC bank and City bank are using customer relationship
Management products. However, Customer Relationship
Management market in India is still in a nascent stage. Indian Banks
have not yet seen big results from Customer Relationship
Management solutions probably because of improper
implementation. Banking industry has undergone tremendous
changes during the past decade during which consolidation and
reform became inevitable. They have woken up to the fact that they
need to understand and manage their customer better. Falling
interest rates are making corporate lending a low revenue business,
prompting banks to look for additional non interest related business.
Thus consolidation in the market has increased the need for
Customer Relationship Management which ensures banks to build
and retain close relationships with their customers, especially the
most profitable ones. This is aimed not only to prevent the
customers from taking their business elsewhere, but also to ensure
that they are offered the products or services that are most
appropriate and most likely to result in new revenue for the bank.

INDIAN BANKING SYSTEM

Banking in India originated in the last decade of the 18 th century.


The oldest bank in existence in India, is the State Bank of India, a
government owned bank that traces its origins back to June 1806
and that is the largest commercial bank in the country. Central
banking is the responsibility of the Reserve Bank of India, which in
1935 formally took over these responsibilities from the Imperial
Bank of India, relegating it to commercial banking functions. After
India’s independence in 1947, the Reserve Bank of India was
nationalised and given broader powers. In 1969, the government
nationalised the 14 largest commercial banks; the government
nationalised the six next largest in 1980. Currently, India has 88
scheduled commercial banks, 27 public sector banks, 31 private
banks and 38 foreign banks holding 18.2% and 6.5% respectively.
In India the banks are being segregated in different groups. Each
group has their own benefits and limitations in operating in India.
Each has their own dedicated target market. Few of them only work
in rural sector while others work in both rural as well as urban. Many
even are only catering in cities. Some are of Indian origin and some
are foreign players. Reserve Bank of India has shown certain
interest to involve more of foreign banks than the existing one rece

Banks were never so serious in their efforts to ensure timely recovery and consequent
reduction of 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 NPA 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
or in part after it has been written off or classified as a bad debt. In accounting, the
bad debt recovery would credit the "allowance for bad debts" or "bad debt reserve"
categories, and reduce the "accounts receivable" category in the books.
Not all bad debt recoveries are "like-kind" recoveries. For example, a collateralized
loan that has been written off may be partially recovered through sale of
the collateral. Or, a bank may receive equity in exchange for writing off a loan,
which could later result in recovery of the loan and, perhaps, some additional profit.

“Recovery is defined as the process of regaining and saving something


lost or in danger of becoming costs.”

Recovery is a key to the stability of the banking sector there should be no hesitation in
stating that Indian banks have done a remarkable job in containment of Non-
Performing Assets (NPA) considering the over all difficult environment. Recovery
management is also linked to the bank’s interest margin’s we must recognize that cost
and recovery management supported by enabling legal framework hold the key to
future health and competitiveness of the Indian banks. No doubt, improving recovery
management in India is an area requiring expeditions and effective actions in legal
institutional and judicial processes. Banks at present experience considerable
difficulties in recovering loans and enforcement of securities charged with them. The
existing procedure for recovery of debts due to banks has blocked a significant
portion of their funds in unproductive assets, the value of which deteriorates with the
passage of time.

Why recovery management?

• Bank deserves to be paid for their products and services. The collection
professionals in Recovery Management Systems will work to see that.

• Reasonable fees with no up-front costs. They get paid only when it is collect.

• Recovery Management Systems will design a collection strategy to meet


bank’s objectives. Bank can recover their debts without losing customers.

• Monthly settlements with meaningful reporting. Status updates on demand.

• Extensive experience obtaining and collecting money judgments in Ohio.


Garnishments, liens, and levies Recovery Management Systems will collect
when legal action is the only option.
• Cutting edge skip-tracing tools and techniques recovery Management Systems
can work 1st, 2nd, and 3rd placements and even turn bank old judgments into
money.

Advantages & Disadvantages of recovery

Advantages:

1) The process of assigning debt collection to outsides enables officials from


Banks to develop more remunerative new business.
2) Third party involvement in debt collection has proven time and again to
improve the chances of recovering bank dues as these people are specialists in
negotiating with debtors and the result usually speak for themselves;
3) A skillfully negotiated debt collection could mean saving on litigation cost.
4) The process of assigning debt collection to outsides enables officials of non-
Banks. Cost to develop more beneficial new business.

Disadvantages:

1) Debt collection does cost money;


2) The debt collection agency will be establishing a relationship with the banks
customers, which could be potentially harmful if they sour that relationship by not
dealing with customers in a courteous manner.

Certain important points for debt recovery

On the basis of the foregoing procedure for normal recovery process, we may list
below certain Don’ts for the dent recovery, which are as follows:

1) Don’t violate or breach recovery policy, procedure prescribed by the principal.


2) Don’t exceed the authority given in the recovery arrangement.
3) Don’t make a call to the debtor before 0700 hours or after 2100 hours.
4) Don’t make anonymous calls or bunched calls to the debtor, which may be
perceived as harassment.
5) Don’t conceal or misrepresent your identity during calls and visit or other
interaction with the debtor.
6) Don’t show uncivil/indecent/dirty behavior or use such language during calls
and visits to the debtor.
7) Don’t harass/humiliate/intimidate/threaten the debtor-verbally or physically.
8) Don’t intrude into the privacy of the debtor’s family members,
friends/colleagues.
9) Don’t disclose the customer’s debts/dues/account information to unauthorized
person.
10) Don’t forget that the debtor is a human being and deserves to be treated with fairness
and courtesy, despite the fact that he/she is a debtor for the time being.

Elements of debt recovery

The agency regarding debt recovery contains the main terms and conditions agreed by
the principal (say a bank) and the agent. The main elements of the debt recovery
would generally include:

1) Specific tasks to be accomplished e.g. the amount to be recovered from the


specified loan accounts in default and the broad time frame.
2) Debt Recovery Policy and Procedure of the bank.
3) Code of conduct in recovery process may include dress code, verbal and
written communication rules top be followed by the individuals employed by
the agency for the purpose of collection.
4) Duties of the agent.
5) Rights of the agent, including the commissions/fees payable by the principal
to the agent/agency for the recovery of debt/other services.

The Debt Recovery Policy and code of conduct in the debt recovery will be
regulations compliant, i.e. in accordance with the directives and guidelines of the
Reserve Bank of India issued from time to time. If, however these are not
incorporated therein, it is advisable for agents to seek clarification from the principal,
as compliance with the regulations is mandatory for the banks and also their recovery
agents.
The Debt Recovery Agreement between the credit institution and the debt recovery
agent/agency serves as the contractual arrangement that is legally binding on both.
Such an arrangement, being bank specific may vary from bank to bank in details. The
duties of the agent/agency the authority delegated and code of conduct prescribed by
the bank in the process of recovery function would to be carefully noted for strict
compliance by the agent.

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