First person account: How an all woman team recovers loans the humane way

As told to Ashna Ambre

Manju Bhatia, Joint Managing Directorof Vasuli Recoveries, talks about setting up an all-women team of recovery agents who extract money the humane way.

Many entrepreneurs would tell you that they started small. However, I did start small. After finishing school in 2003, I had to immediately look for a job. I was in Indore, my home town, and worked as a receptionist at a pharmaceutical firm owned by a family friend.

After a few weeks here, I started expanding my scope of work. The accounting and commerce theories I had learnt in school were put through the wringer. I began handling accounts, did bookkeeping and tally work, and got actively involved in the trading of generic drugs.

More from Economy

Inflation likely to be a big focus area for budget 2024, say sources Explained: Will the Bank of Japan break tradition and raise interest rates?

Drugs to loans

The pharma firm owners also owned a small loan recovery business company. It had State Bank of India (SBI) as its only client. The bank gave the company a list of defaulters from whom recoveries had to be made.

After working with the pharma division for two years, in 2005 I was asked to handle a special case for the recovery division. One of the defaulters on the SBI list was a prominent minister. The situation was delicate and had to be dealt with caution.

[caption id=“attachment_913593” align=“alignleft” width=“380”]  Manju Bhatia. Image: Entrepreneur[/caption]

I got an appointment with the minister after much difficulty and reminded him of his uncleared dues. He was clueless about the default and immediately squared up the account. That is the first thing I learnt about the business. I realized that all defaults are not deliberate. Sometimes people forget to make payments because of their busy schedules among other reasons. I also realized there existed a huge gap between bankers and customers. Recovery agents were perceived to be strong men doing the hard talk and also threatening defaulters for payments upfront. They were considered irritants who harass defaulters to recover funds.

Firm, not stern

I decided to look at things a little differently. I felt women would make better recovery agents for when a woman approaches a defaulter, usually he or she gets embarrassed and tends to settle accounts immediately. There are few chances for arguments as I think women have a gentle approach.

We started off by undertaking recoveries for personal loans, but from 2004 onwards we began working in the agricultural areas as well. The year 2006 was a turning point for the company. The enactment of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act cleared roadblocks. The Act permitted companies like ours to make recoveries on behalf of public sector banks. We approached a lot of banks that were headquartered in Mumbai. But most of them were not convinced about outsourcing their recovery services. They too held the popular preconceived notion about recovery agents. That is when I played my trump card and mentioned the idea of an all-woman recovery agency. It clicked. Hence we decided to relocate Vasuli Recoveries to Mumbai in 2007.

Not just recoveries

We have been in this business for eight years now. We work with 20 nationalized banks and have 250 women agents working with us across 26 branches in the country. I don’t think there is a model like this in the developing world.

We work only with nationalized banks primarily for two reasons. First, private sector and foreign banks don’t need recovery agents. If there is a default in payments, then the bank demands that the loan be returned. If the individual cannot afford to pay, then the asset which is provided as collateral is taken into custody and sold off to recover the loan amount. Nationalized banks have a more humane approach to tackle defaults. In such a case, a reminder is given to the individual to pay up the amount with an additional default fee. If an individual is still unable to pay up, there is no demand made for the entire loan amount to be returned; other options are discussed instead.

In case of non-performing assets like home loans, we get a five percent commission for a loan value of over Rs. 5 lakh. In the case of auctions of assets valued at more than Rs .30 lakh, we receive a quarter or half percent. We do not refuse small accounts. From charging Rs.25,000 per month per client, we have now gone into a better league. In the year 2011-12, the company handled cases worth Rs. 500 crore and earned commissions worth Rs.10 crore. The next step for us is deeper penetration into state capitals-we plan to open 15 branches in the interiors by end-2014. Eventually we are looking at becoming an asset reconstruction company that handles the entire process right up to the auction of properties.

Welfare and respect

Performing recoveries for nationalized banks cover secured and unsecured loans. It also includes a lot of farmer loans. We have to educate the defaulters in this space about the RBI provisions for agriculture loans; in most cases, they are clueless about the benefits and waivers. With an aim to create awareness, we hold ‘Loan Melas’ thrice a month across districts. All our efforts are directed towards the borrower getting a No Objection Certificate and a clean chit, so that they can apply for loans in the future too. However, in case of defaults on big ticket loans that people acquire on the basis of goodwill, our approach is totally different.

These defaults are intentional, with an objective of not paying up despite having the funds. Hence, we have been harsh and even forceful in such cases. The property, which served as collateral, is then auctioned to recover the bank’s money. This process includes issuing public notices, forceful eviction, sealing properties and finally auctioning them. In this business, sometimes, you just have to do things the hard way to do them right.

This was first published in the Entrepreneur magazine