Covid-19, moratorium hit loan recovery biz

Debt collectors in India have suddenly found themselves jobless, ironically at a time when lenders are grappling with rising cases of overdue loans, as the country’s central bank has offered a temporary reprieve to companies and individuals from making loan repayments because of the coronavirus pandemic.

The collection agencies, which solely depend on lenders for recovery assignments, have suddenly seen business dry up.

Four agencies Mint spoke to said that their revenues have dropped more than 90% as banks have stopped giving any new business since the lockdown started on March 25.

Sanjeeb Manoranjan Saha, the owner of Storm Financial Services, said his company now only has a handful of pending non-performing asset (NPA) cases. Storm Financial Services, based in Thane near Mumbai, takes assignments from private banks and non-banking financial companies (NBFCs), to recover both bad loans and loans that are overdue but not yet classified as non-performing.

“We are not able to make any money at the moment as there are no new cases allocated by banks since the lockdown. That apart, manpower is one of the primary resources of this industry and 40% of my employees have gone back home. While some of them are willing to work from home, others are reluctant,” said Saha.

Recovery agencies are paid a commission of at least 3% on the amount recovered and it changes depending on how long the loan was delinquent and its size. The moratorium, Saha said, has caused a lot of disruption in the industry.