The recent controversies reported over the aggressive recovery mechanisms adopted by a few banks, especially private banks, have significantly impacted collection operations of almost all players, rating agency Crisil said in a report released Tuesday.
?Crisil ?s analysis reveals that collection operations in major centres, like Mumbai, Pune, Kolkata, Chennai, Hyderabad, and Bangalore, had come to a virtual standstill between end-September and mid-October 2007,? the release said.
?Delinquencies for September and October of 2007 are expected to be high on account of the slowdown in recovery efforts and willful default by some borrowers.?
The slowdown in collections was a result of lenders not wanting to risk tarnishing their reputations. These banks are now re-assessing their recovery strategies ?in view of the challenging operating environment,? the report study reveals without mentioning that banks were adopting unlawful means to recover dues.
?Law enforcement agencies too have taken strong exception to the recovery mechanisms of some lenders and have asked the industry to ensure that persons employed by recovery agencies have a clean background,? the Crisil report said. But lenders were now toeing the law and involving law enforcement authorities for recovery of dues.
Besides, the report observes, lenders have taken steps to overcome the impact on asset quality and improve their collection and recovery mechanisms that include strengthening underwriting norms, increasing the use of technology in collection and recovery, training employees and collection agents, and ?in-housing? collection and recovery activities.
The rise in delinquencies and attendant unfavourable reports pertain predominantly to unsecured personal loans and credit cards; segments such as mortgage, vehicle, and two-wheeler loans have not witnessed significant deterioration in asset quality. Although recovery efforts have steadily improved after the interim slowdown. ?Crisil believes that the industry?s asset quality will witness higher delinquencies over the near term.?
