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Collection Policy February 2017 Corporate office Address: Grape Garden, No. 27, 3rd A Cross, 18th

Collection Policy

February 2017

Corporate office Address:

Grape Garden, No. 27, 3rd A Cross, 18th Main

Koramangala 6th Block, Bengaluru 560 095

This document is for Internal Uses only and may not be reproduced in any form without the consent of Ujjivan Small Finance Bank Ltd

Confidential   Policy Approval Committee Samit Ghosh Chief Executive Officer & Managing Director

Confidential

 

Policy Approval Committee

Samit Ghosh

Chief Executive Officer & Managing Director

Sneh Thakur

Head of Credit and Collections - Microfinance

Arunava Banerjee

Chief Risk Officer

Srikumar Vadake Varieth

Head of Legal

Premkumar G

Chief Vigilance Officer

Alagarsamy A P

Head of Audit

Carol Furtado

Head of HR & Service Quality

Sridhar Mallu

Head of Credit - Housing & MSE

 

Proposed by

Sneh Thakur

Head of Credit and Collections - Microfinance

Sridhar Mallu

Head of Credit - Housing & MSE

Vijay Kumar

National Collections Manager

Effective Date

Feb 01, 2017

Approver

Board of Directors

Approved on

Jan 10, 2017

Policy Owner

Head of Credit and Collections – Microfinance & Head of Credit - Housing & MSE

Review frequency

Annual

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Contents

Confidential Contents 1. INTRODUCTION 7 1.1. Scope Objectives and Principle 7 1.2. Guiding Principles of

1. INTRODUCTION

7

1.1. Scope Objectives and Principle

7

1.2. Guiding Principles of Collection: Code of Conduct

8

1.3. Collection Dos and Don’ts

10

1.4. Policy Review & Approval process

12

1.5. Collection Organization Hierarchy: Micro Finance GL & IL & Housing &MSE

12

1.6. Product Segment

13

2. MICRO FINANCE- GROUP LENDING

14

2.1. Identifying Overdue

14

2.2. Broad Default Classification:

14

2.3. Managing Client and Spouse demise cases

16

2.4. Collection

strategy

18

2.5. Dunning strategy

19

3. MICRO FINANCE - INDIVIDUAL LENDING

19

3.1. Type of defaults:

20

3.2. Collection strategy:

22

3.3. Bucket wise collection strategy

22

3.4. SMS Strategy

24

3.5. Calling Strategy

24

3.6. Field Visit Strategy (> 30 DPD)

25

3.7. Dunning strategy

25

3.8. ECS/ACH Representation

26

3.9. Legal Strategy

26

4. COLLECTION PROCESS FOR HOUSING & MSE

26

4.1. Introduction

26

4.2. Collection Strategy

27

4.3. Bucket wise collection strategy

28

4.4. SMS Strategy

30

4.5. Calling Strategy

31

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Confidential 4.6. Field Visit Strategy (> 30 DPD) 32 4.7. Dunning strategy 32 4.8. ECS/ACH

4.6. Field Visit Strategy (> 30 DPD)

32

4.7. Dunning strategy

32

4.8. ECS/ACH Representation

32

4.9. LEGAL STRATEGY

32

4.10. Recovery & Resolution Mechanism

34

4.11. Engagement of Recovery Agents

34

4.12. Identification of Wilful Defaulters

35

4.13. Tools for Recovery

38

4.13.1. Restructuring, Rephasement& Rehabilitation

38

4.13.2. Loan Rescheduling

40

4.13.3. Exit Strategy

42

4.13.4. Settlement/Compromise – For secured & Unsecured IL

42

4.13.5. Sell down to Asset Restructuring Company/other entities

45

4.13.6. Write off/Waiving of Legal action

45

4.13.7. Invoking the Provisions of SARFAESI Act

46

5. LEGAL ACTION & RECOVERY (Procedure)

49

5.1. Guidelines on seizure / repossession of assets hypothecated to Ujjivan

49

5.2. Arbitration proceedings

51

5.3. SEC 138/25 NI ACT

54

5.4. Demand Promissory Note

57

5.5. LokAdalat

58

5.6. Debt Recovery Tribunal

59

6. RECOVERY MECHANISMS - Repossessions

60

6.1. Giving notice to borrowers

60

6.2. Repossession of Secured assets

60

6.3. Valuation & sale of secured assets

61

6.4. Opportunity for the borrower to take back the secured assets

61

7. SKIP TRACING PROCESS

62

8. POLICY ON NON-STARTERS

63

9. COLLECTION STRATEGIES FOR MASS DEFAULT BRANCHES

67

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Confidential 9.1. Identification of mass default cases 67 9.2. Strategies for handling mass default cases: 68

9.1. Identification of mass default cases

67

9.2. Strategies for handling mass default cases:

68

10. REPAYMENT MODE

 

69

11. RECEIPT BOOK PROCESS – for field collections

70

11.1. Indenting, distribution, custody and verification of Receipt Books

70

11.2. Record maintenance and audit checks:

71

11.3. Process for lost receipt book

71

12.

COLLECTION MANAGEMENT SOFTWARE (IC4)

71

12.1. Introduction

 

71

12.2. IC4 Overview:

73

12.3. Mobile Module:

73

12.4. Web module:

73

12.5. Collection Management Responsibilities:

73

13. TELE-CALLING FOR MICRO FINANCE IL, HOUSING & MSE

75

14. COLLECTIONS

CAPACITY PLANNING

77

14.1. Collection reviews

78

14.2. Supervisory Review

78

15. COLLECTOR TRAINING

 

79

16. COLLECTION MIS

79

17. DAILY COLLECTION REPORT

80

18. LATE PAYMENT CHARGES– ALL PRODUCTS

80

19. LOAN WRITE OFFs

 

80

19.1. Process for Write off (Existing)

81

19.2. System write-off process using IC4

82

19.3. Write off recovery:

82

19.4. Monitoring Bad debt Recovery

83

20.

STAFF LOAN RECOVERY

84

20.1. Recovery Process - Pre-Staff Loan OD:

84

20.2. Recovery Process - Post-Staff Loan OD:

85

 

20.2.1.

Steps of Recovery

85

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Confidential 20.3. Receivables from Staff 87 21. DOCUMENT PRESERVATION 87 22. PROVISIONING NORMS 88

20.3.

Receivables from Staff

87

21. DOCUMENT PRESERVATION

87

22. PROVISIONING NORMS

88

23. ANNEXURE

1:

Abbreviations

89

24. ANNEXURE 2: References to Key RBI Circulars

90

25. ANNEXURE 3: Notice Formats

91

26. ANNEXURE 4: IC 4 Workflows with OD reasons

104

91 26. ANNEXURE 4: IC 4 Workflows with OD reasons 104 Detailed WF.xlsx     105

Detailed WF.xlsx

 
 

105

26.1.

ANNEXURE 5: IC4 Auto Report formats

107

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1.

I NTRODUCTION

Confidential 1. I NTRODUCTION The purpose of the collection policy is to create a set of

The purpose of the collection policy is to create a set of standardized policies and procedures for collection activities. An effective collection policy is essential to keep a strong control on the portfolio of the USFBL and thereby ensuring that the credit expense of the organization is low. It is essential to adopt effective collection strategies that promote on – time repayment as well as manage delinquencies better. The essential component of a sound NPA management system is quick identification of non- performing advances, their containment at minimum levels and ensuring that their impingement on financials of Ujjivan are minimum. Thus the Collections Policy of Ujjivan Small Finance Bank Ltd., (hereafter referred as “the USFBLor “Ujjivan”)shall aim at making the recovery process faster, so that Gross NPA level is maintained within the risk appetite of the USFBL.

1.1. Scope Objectives and Principle

The quality and performances of advances have a direct bearing on the profitability of Ujjivan. Despite an efficient credit appraisal, disbursement and monitoring mechanism, problems can still

arise due to various factors and Non-Performing Asset (NPA) may arise. These factors may be internal or external.

Policy outlines structured collection mechanism for all recognized critical and stressed accounts.

The Loan Review Mechanism to be triggered on detection of early warning signals to ensure an effective and expeditious response for correction.

The Policy emphasizes a broad approach, including critical parameters to be taken into account, towards the collection, recovery and resolution of loans through rehabilitation, compromise settlements etc.

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Confidential ► The Policy also proposes an approach for cleansing of NPA portfolio through judicious write-

The Policy also proposes an approach for cleansing of NPA portfolio through judicious write- offs.

Objectives:

To minimize delayed payment post due date (or bounce rate of PDC/ECS).

To ensure lower forward flow from initial bucket (from 0-30 DPD to >30 DPD).

To reduce the impact of provision and losses on different products – secured & unsecured.

To reschedule customers who have short term genuine repayment inability with the right intent of payment.

To educate customers the benefits of prompt repayment and consequences of non-payment

To ensure collection cost is under control

To provide inputs to credit policy based on collection experience.

To ensure compliance with regulations and applicable Code of conduct

To manage collection of penalty fees based on USFBL norm.

1.2. Guiding Principles of Collection: Code of Conduct

The debt collection policy of the USFBL is based on principle of dignity and respect to customers. The USFBL believes in following fair practices with regard to collection of dues and repossession of security thereby fostering customer confidence and long-term relationship and thereby ensures that there is no coercive practice followed while collecting the dues.

The repayment schedule for any loan sanctioned by USFBL is fixed taking into account repayment capacity and cash flow pattern of the borrower. The USFBL explains to the customer upfront the method of calculation of interest and how the Equated Monthly Instalments (EMI) or payments through any other mode of repayment are appropriated against interest and principal due from the customers. The USFBL expects the customers to adhere to the repayment schedule agreed to and approach it for assistance and guidance in case of genuine difficulty in meeting repayment obligations.

The USFBL’s Security Repossession Policy aims at recovery of dues in the event of default and is not aimed at whimsical deprivation of the property. The policy recognizes fairness and transparency in repossession, valuation and realization of security. All the practices adopted by the USFBL for follow-up and recovery of dues and repossession of security are in consonance with the Law. The security repossession procedure is set in motion only after all attempts by the USFBL to discuss with the borrower the ways and means to overcome the financial hurdles/default in payment have failed. As an exception, it is to be noted that the USFBL has the right to possess

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Confidential

Confidential the financed asset, as a preventive measure, even in instances where there has been no

the financed asset, as a preventive measure, even in instances where there has been no default but violation of the terms and conditions of the Loan Agreement.

Ujjivan's recovery procedure shall be based on good manners, impartial treatment and persuasion.

Ujjivan shall treat its defaulters with respect and dignity.

All communications to the customer are in writing, by telephone or through personal visit. The customer is contacted by telephone on the numbers (residence/work place/mobile) provided by him/her in the application form filled in at the time of taking the loan/modified subsequently as intimated to the USFBL. If the customer is not responding/not reachable over telephone or not paying even after telephonic request, the USFBL's representatives make personal visits to the customer's residence/workplace during reasonable hours of the day.

Ujjivan shall contact people other than the Borrowers only to locate the borrower

The USFBL staff or any person authorized to represent the USFBL in collection of dues or/and security repossession identifies himself / herself and displays the Identity card/authority letter issued by the USFBL upon request.

Representatives of Ujjivan will not harass or abuse borrowers with threats or offensive mannerisms /language at given time

The USFBL is committed to ensure that all written and verbal communication with its borrowers are in simple business language and the USFBL adopts civil manners for interaction with borrowers

Ujjivan shall follow only ethical practices and will not resort to unduly coercive tactics in the process for recovering NPAs.

Normally the USFBL’s representatives will contact the borrower between 0700 hours and 1900 hours, unless the special circumstance of his/her business or occupation requires the USFBL to contact at a different time.

Tele callers of call-centres will ensure simple business language, decorum and persuasion while making follow-up calls

Borrower’s requests to avoid calls at a particular time or at a particular place are honoured as far as possible.

The USFBL documents the efforts made for the recovery of dues, as far as possible and the copies of communication sent to customers, if any, are kept on record

All assistance is given to resolve disputes or differences regarding dues in a mutually acceptable and in an orderly manner

Inappropriate occasions such as bereavement in the family or such other calamitous occasions are avoided for making calls/visits to collect dues

Up-to-date details of the recovery agency if engaged by the USFBL are displayed at its website

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Confidential ► The USFBL provides the loan account statement to its customers on request basis when

The USFBL provides the loan account statement to its customers on request basis when changes in period of loan, quantum of EMI etc. take place. Changes in the rate of interest are communicated to the customers as and when they are effected

The USFBL bears the cost of getting duplicate sale deed in case the original furnished to it is misplaced at its end on account of any eventuality

Collections team can disclose the loan obligations only to the customer, co-borrower or the co-guarantor.

If the customer is not present and only minors/elderly / infirm are present at the time of the visit, the Collections Representative should end the visit with a request that the customer call back. He should not enter the house unless invited. He should not wait for the customer in the customer’s residence unless specifically asked to do so by the customer or family.

Ujjivan representatives shall not make false, deceptive, or misleading claims for the purpose of collecting repayments. This includes misrepresenting his/ her identity or falsifying facts about debt status or consequences of non-repayment or claiming any monetary or non- monetary awards post tracing of the customer.

Ujjivan shall not initiate any legal or recovery measures including repossession of the security without giving due notice to the borrower in writing. Ujjivan shall follow all such procedures as required under law for recovery/repossession of the security.

Repossession of security is aimed at recovery of dues and not to deprive the borrower of the security. Repossession, valuation and realization of security shall be done in a fair and transparent manner within the purview of RBI’s Guidelines.

All communication/letters to the customer either through mail or through telegrams shall be handled directly by the USFBL as appropriate. Mail dunning / telegrams/ Posts/ phonograms/SMS etc. shall be in a format approved by Collections Unit of the USFBL.

Customer’s questions should be answered in full. They should be provided with information requested, given assistance and issues resolved. Accounts with unresolved issues are to be escalated to management.

Customer or third party requests for supervisor names or requests to speak with supervisor should always be honored.

Customers may use USFBL’s grievance redressal mechanism/ escalation matrix in case of any concerns or grievances pertaining to collection of dues & recovery

1.3. Collection Dos and Don’ts

DO’S

DON’TS

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Confidential

Confidential ! Do dress in formal clothes and carry the company identity card during work hours

! Do dress in formal clothes and carry the company identity card during work hours positively

! Do be punctual and available at Centre Meetings and in the Branch Office

! Visit and analyze the customer situation

" Do not get personal, tough or aggressive or abusive

" Do not use coercion of any sort to make recovery of payments.

" Do not humiliate borrowers in public places by discussing their loan over dues with third parties/neighbors

! Do talk in a pleasant, polite and non-

" Do not threaten that assets will be seized

aggressive manner at all times. Answers should be factual and to the point

! Collection interactions should be based on fair conduct and persuasion

! Present all the information required by the customer in an appropriate manner

! Do answer borrower’s query to the satisfaction of the borrower

! Keep records of interactions with the customer in the IC4

" Do not pressurize the members & make unrealistic demands

" Do not claim that the personal documents collected earlier will form part of collateral

" Do not force the customers to make payments by not giving them an alternative option

" Do not humiliate the customer, lose temper, get angry or irritated irrespective of the situation

" Tone should not be harsh or loud

! Do provide a valid receipt for each loan installment payment received (partial or full) and record the payment in the borrower’s loan passbook/loan card immediately after the transaction and educate customers to keep all the receipts for all future references.

" Do not have unending center meetings till payments are made

" Do not give false promises to customers like promising higher loans in case of part payments, providing jobs to family members etc.

" Do not seize customer assets or any personal documents e.g. Voter ID, ration card etc.

! Visit the Customer on Promise to Pay dates given by them on working days only

" Do not share customer’s information with other member borrowers/customers

! Maintain a reasonable distance from the customer

" Do not call borrowers at inappropriate times such as bereavements, illness, social occasions such as marriages, births etc.

" Do not visit or call borrowers between 7 pm to 7 am positively

" Do not discriminate on the basis of caste and religion

! Contact customer at appropriate hrs. Timings: Earliest- 7.00 AM & 7.00 PM

! Do keep borrower information confidential and use it only for permissible purposes defined by ujjivan

" Do not go for collections in a group of more than 2 staff members at a time

" Do not visit the customers on weekly or public holidays

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Confidential 1.4. Policy Review & Approval process The ownership of this policy shall lie with National

1.4. Policy Review & Approval process

The ownership of this policy shall lie with National Manager Collections and Recovery, Head of Credit – Micro Finance and Head of Credit - Housing & MSE. The Policy would be reviewed and updated at least on an annual basis. However, it may also be reviewed on an ad-hoc basis to reflect changes in regulatory guidelines or market specific changes. The reviewed and updated Policy would be submitted to the Credit Risk Management Committee (“CRMC”) for review and sign off. Subsequently the same will be placed to the Risk Management Committee of the Board (“RMCB”) 1 for review and approval. The minutes of meeting of the Committee and the Board would be documented.

The Credit Risk Management Committee shall be constituted of the following members:

Chief Executive Officer (CEO) and Managing Director

Chief Risk Officer (CRO)

Head of Credit and Collections – Microfinance

Head of Legal

Head of Audit

Chief Vigilance Officer

Head of Credit - Housing & MSE

1.5. Collection Organization Hierarchy: Micro Finance GL & IL & Housing &MSE

1 Refer to the SFB’s Risk Management Governance Policy for further details on the RMCB

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Confidential • Collection structure is common for all business verticals, Collections officers will be allocated

Collection structure is common for all business verticals, Collections officers will be

allocated separately for secured and unsecured verticals. Head Credit and Collecdons Nadonal Manager Collecdon
allocated
separately
for
secured
and
unsecured verticals.
Head Credit and
Collecdons
Nadonal Manager
Collecdon & Recovery
Telecalling Team lead
Regional collecdon
Manager
Collecdon Operatons
manager
Telecallers
Area Manager -
Collecdons
Cluster Manager-
Collecdons
Officer- Collecdon

1.6. Product Segment

Micro finance Group and Individual lending

Housing and MSE

Joint Liability Group (JLG) loans

Housing Loans

Individual Business Loans

Loan Against Property (LAP)

Individual Livestock Loans

Secured Business Loans

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Confidential

Confidential

Agriculture Loans

Enterprise business Loans

Individual Home Improvement Loans (HIL)

Individual Higher Education Loans

2. MICRO FINANCE- G ROUP LENDING

CROs are primarily responsible for both sales & collections of JLG loans. They are the 1 st point of contact to all group lending borrowers. The supervisory structure from CRM to AM shall get involved in the collection process at various default category stages. Accountability, customer follow ups &co allocation of accounts have been explained in detail in this section.

2.1. Identifying Overdue

The action plan for recovering defaults will vary depending on the reasons of default. Hence it is necessary to first identify the default reasons& subsequently develop an action plan for arrear collections.

2.2.

Broad Default Classification:

1.

Individual defaults

2 .

Technical defaults

3.

Defaults caused by Fraud and Mass Defaults

Type of Default

Action Plan

Person Responsible

Individual Defaults

 

Temporary repayment problem

Cause shall be investigated and constant follow-up with group and

CRO and CRM

1. Late receipt of salary

Borrower shall be conducted to

2. Illness of a family member

collect the dues.

3. Sudden cash needs

Long term repayment problem

CRO shall investigate the cause and escalate to CRM. CRM shall analyse the situation and keep in constant touch with

CRO and CRM

1.

Death of an earning member

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Confidential Type of Default Action Plan Person Responsible 2. Loss of job or the customer until

Type of Default

Action Plan

Person Responsible

2. Loss

of

job

or

the customer until his/her situation improves. And depending on the actual situations also provide an option to reschedule the loan and short term

 

Accident

leading

to

permanent disability

of

an

earning

member

3. illness

Serious

of

a

repayment holiday for the set of customers affected by natural

family member

 

4. calamity

Natural

calamities

leading

to

loss

of

assets

5. Multiple borrowings

6. Major

business

downturn

including

crop loss

Wilful defaulter

CRO and CRM shall follow up with the borrower and group member for collection in accordance with JLG norms. 2

CRO and CRM

Abscond customers

Investigation shall be conducted to in accordance with skip tracing process as defined in this policy.

CRO and CRM, Collection team

Technical Defaults

Wrong Posting of repayment

 

Branch shall intimate the operations department to have the issue rectified.

Branch and

Operations

Repayment window changes

Branch shall notify SQ, collections team and operations department to ensure loans are booked in the actual window. Rectified loan card shall be handed over to customer and RO copy shall be sent to the regional operations department.

Branch and SQ

Default caused by Fraud and Mass Defaults

 

Default caused by fraud

 

Cases shall be reported immediately to the RFMC. Investigation and follow through shall be done in accordance with

CRM/ CBH/ RFMC

2 As per Group loan Credit Policy

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Confidential Type of Default Action Plan Person Responsible   RFMC Process.   Mass default Upon

Type of Default

Action Plan

Person Responsible

 

RFMC Process.

 

Mass default

Upon confirmation from Branch supervisor an immediate intimation along with initial observations shall be sent to NCM, RFMC, Head credit Micro Business, Head Vigilance

CRM, CBH & AM, collection team, Vigilance, RFMC

2.3. Managing Client and Spouse demise cases

1. Deceased customer: In the event of customer demise, neither the family nor the group members should be forced to make repayments. The life insurance company will settle the claim if the insurance is active.

Action Plan:

When a customer expires the CRO must immediately inform the CRM and update IC4. CRM will inform operations, insurance and the credit department.

CRM will then visit the customer’s house, speak with the nominee clearly explaining the benefits they will receive from the insurance company and the documents he / she is required to provide.

Once the death claim documents are received, branches will courier the same to the insurance department.

Insurance department will submit the death claim documents to the insurance company.

Once the claim amount is received from the insurance company, Nominee has to settle the loan amount with Ujjivan.

2.

Spouse deceased: In the event of spouse death, CRO should not force the customer or the group members to make payments during the period.

Action Plan:

When a customer’s spouse expires the CRO must immediately inform the CRM and update in IC4.

CRM will then visit the customer’s house, speak with the nominee (customer) clearly explaining the benefits they will receive from the insurance company and the documents he / she is required to provide.

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Confidential • Once the death claim documents are received, branches will courier the same to the

Once the death claim documents are received, branches will courier the same to the insurance department.

Insurance department will submit the death claim documents to the insurance company.

Based on the customer preference, Cashier/CCR will choose one of the below options while marking the case as demise in BR.Net.

o

Continue repayment as per schedule

o

Loan closure on insurance claim settlement

CRM will contact/visit the customer to understand her preference and will obtain a request letter or cheque as the case may be and authorize the entry posted by the Cashier/CCR.

In few instances spouse may not insured or insured but not eligible for claim due to nature of death, in such cases customer will not be forced to pay the immediate outstanding EMI due for the month. The emi falling due on the subsequent month will be collected as per existing process in center meetings. If problem seems long term/critical we can lookout option of loan rescheduling or repayment holiday for such customer depending on the criticality. Overdue emi will reflect as an overdue till it is not regularized.

If the customer wishes to continue her loan

CRM should collect a request letter from the customer along with the claim documents

If the customer wishes to settle her loan through insurance settlement

1. Customer will not be forced to pay the immediate outstanding EMI due. The EMI falling due on the subsequent month will be collected at the center meeting as per the existing process. The overdue EMI will reflect as an overdue till the tenure of the loan. However if the customer wishes to clear the previous overdue or close the existing loan, she may do so at her convenience.

2. On intimation from the insurance company, the cheque issued by the customer will be sent for clearing by the insurance team.

3. On realization of the cheque the loan account will be closed.

4. If the cheque is dishonored then the insurance team will intimate the concerned branch supervisors by email

5. On receipt of intimation the branch team will follow up with the customer for collection of outstanding loan amount.

6. If the branch team is unable to recover they will input appropriate remarks against the customer in Indus Collection software (IC4), which will require authorization by the CRM.

7. All cases reported as Intentional defaulters will get allocated to Collections team automatically on Indus Collections software (IC4).

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Confidential 8. Insurance team will store all the dishonored cheques. Collection/Vigilance can request retrieval of

8.

Insurance team will store all the dishonored cheques. Collection/Vigilance can request retrieval of cheques for any future reference.

Customers will be eligible for a repeat loan in accordance with the existing credit policy guidelines. It is important to note that the repayment history of the customer’s previous loan (during the demise of the spouse) shall have no bearing on the sanctioning of her new loan, provided pre-closure or repayment has happened in accordance with the above defined process.

Nominee recovery allocation to collection team: OD Cases where Insurance is settled to Nominee and crossed 45 days (from the date of Insurance settlement) with >5k OSP amount will be allocated to field collection team on a monthly basis

2.4. Collection strategy

Collection strategy for Ujjivan will be based on days past due &reasons for overdue.

The primary responsibility of overdue collection lies with the branch staff. Cases are co-allocated to other functions based on reasons/criticality of each case as authorized by the distribution supervisors:

 

Overdue

       

Bucket

Activity

Responsibility

Monitoring

Account allocation in IC4

Day 1

All overdue accounts appear in IC4

CRO/LO

CRM

CRO,CRM

 

CRM to monitor the

     

1

to 7 days

collection and visit the customer.

CRO/CRM

CRM/CBH

CRO, CRM, CBH

 

Nonstarter cases allocated to field credit team

CRO, CRM,

CRM, Cluster

 

Day 8

Field Credit

Credit

CRO,CRM , FCO

Officer (FCO)

Manager

8

to 30

Auto escalation made to next 2 supervisory levels based on reason

     

days

CBH/AM

AM

CRO, CRM, FCO, CBH, AM

> 90 Days with >75% of OSP cases in GL

 

Officer-

Area

CRO, CRM, field credit team, CBH, AM, Collection team

Allocation to field Collection team

Collections

manager-

Micro finance

Collection

Legal

Legal action initiated

Collection

RVM

CRO, , CRM, , field credit

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Confidential cases case to case basis Manager and team, CBH , AM, Collection team and legal

cases

case to case basis

Manager and

team, CBH, AM, Collection team and legal team

Legal manager

Abscond cases and sub-lending/ ghost loans/mass default can be allocated to collections immediately if authorized by distribution supervisor within 15 days of default in IC4; else auto allocation on Day 15

All Willful defaulters in group lending will be auto allocated to field collections after 60 days

Deceased Spouse Insurance Settled cases, If nominee is a willful defaulter, it can be allocated to collections

2.5. Dunning strategy

Letters will be issued to customer from the system for debt collection purpose. Multiple reminder notices can be sent to the customers.

For difficult accounts multiple reminder notices can be sent to the customers as below. The branch team can raise a request in IC4 and regional office will send across the notices to the customer.

Reminder Notice

GL

First reminder notice

8 to 30 days

Second reminder Notice

31

to 60 Days

Final reminder notice

61

to 90 days

3. MICRO FINANCE - INDIVIDUAL LENDING

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Confidential

Confidential LOs are primarily responsible for both sales & collections of unsecured individual loans. The

LOs are primarily responsible for both sales & collections of unsecured individual loans. The supervisory structure from CRM to AM shall get involved in the collection process at various default category stages. Accountability, customer follow ups & co-allocation of accounts have been explained in detail in this section.

3.1. Type of defaults:

The action plan for collection will vary depending on the reasons of default. Accordingly, defaults are broadly classified as below:

Individual defaults

Technical defaults

Defaults caused by Fraud and Mass Defaults

Type of Default

 

Action Plan

Person Responsible

Individual Defaults

   

Temporary repayment problem

 

Cause shall be investigated and Constant follow-up with

LO and CRM

1. Late receipt of salary

borrower/co-borrower shall be

2. Illness of a family member

conducted to collect the dues.

3. Sudden cash needs

 

Long term repayment problem

 

LO shall investigate the cause and escalate to CRM.

LO and CRM

1.

Death of an earning member

CRM shall analyse the situation and keep in constant touch with

2.

Loss

of

job

or

the customer until his/her situation improves. And depending on the actual situations also provide an option to reschedule the loan.

Accident

leading

to

permanent disability

of

an

earning

member

3.

Serious

illness

of

a

 

family member

 

4.

Natural

calamity

leading

to

loss

of

assets

5.

Multiple borrowings

6.

Major

business

downturn

including

crop

loss,

Cattle

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Confidential

Confidential death     Wilful defaulter LO and CRM shall follow up with the borrower &

death

   

Wilful defaulter

LO and CRM shall follow up with the borrower & co-borrower for collections

LO and CRM

Abscond customers

Investigation shall be conducted in accordance with skip tracing process as defined in this policy.

LO, CRM, CBH Credit officer &Collection team

Technical Defaults

 

Wrong Posting of repayment

Branch shall intimate the operations department to have the issue rectified.

Branch and

Operations

Repayment window changes

Branch shall notify SQ, collections team and operations department to ensure loans are booked in the actual window. Rectified loan card shall be handed over to customer and RO copy shall be sent to the regional operations department.

Branch and SQ

Default caused by Fraud and Mass Defaults

 

Default caused by fraud

Cases shall be reported immediately to the RFMC. Investigation and follow through shall be done in accordance with RFMC Process.

CRM/ CBH/ RFMC

Mass default

Upon confirmation from Branch supervisor an immediate intimation along with initial observations shall be sent to NCM, RFMC, Head credit Micro Business, Head Vigilance &Business head

CRM, CBH & AM, collection team, Vigilance, RFMC

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Confidential 3.2. Collection strategy: The various collection strategies based on aging and severity of the cases

3.2. Collection strategy:

The various collection strategies based on aging and severity of the cases shall be as below:

   

BACK END

 

FIELD (Involvement based on buckets)

   
 

BUCKET

SMS

TELE-

REMINDER

LO

CBH

AM

CREDIT

COLLECTION

COLLECTION

RBM

LEGAL

 

CALLING

NOTICE

OFFICER

OFFICER

MANAGER

1

to 7 Days

 

! !

! 3

!

 

X

X X

 

X

X

X

X

8

to 30 Days

 

! !

!

!

 

! !

X

 

X

X

X

X

31

to 60 Days

 

! !

!

!

 

!

! !

 

!

!

X

X

61

to 90 Days

 

! !

X

!

 

!

! X

 

!

!

X

X

91

to 180 Days

X

!

X

!

 

!

! X

 

!

!

!

!

>180 Days

X

!

X

!

 

!

! X

 

!

!

!

!

Abscond cases and sub-lending/ ghost loans/mass default can be allocated to collections immediately if authorized by distribution supervisor within 15 days of default in IC4; else auto allocation on Day 15

All cases >30days DPD will be allocated to field collections in IC4

Deceased Spouse Insurance Settled cases, If nominee is a willful defaulter, it can be allocated to collections

3.3.

Bucket wise collection strategy

   

Staff

Bucket

Activities

Responsible

Bucket 1 (1 to 30)

Missed payment/Bounce SMS sent from the core system

Tele-calling

1 to 3 days: Loan officer to visit/ call the customer to collect repayment or obtain PTP and update in collection software.

Manager,

 

Collection

>3 days: Bounce calling from the Collections tele-calling team to obtain PTP and loan officer to ensure repayment is picked up. In case the customer has not honored the PTP for more than 3 times the account will be escalated to next 2 supervisory levels in distribution.

Operations

Manager,

Branch

Manager,

Loan

In case the customer is temporarily not contactable during 3 consecutive field visits the account shall be allocated to next 2 levels in distribution and subsequently to officer- IL Credit for mandatory field visit.

Focus is to normalize the account

Officer,

Credit

Officer

Based on the request from Distribution in IC4 ECS/Cheque/ACH representation will be done by collection operation manager in

3 Reminder notices based on request

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Confidential

Confidential   consultation with National manager- co llection and recovery.   • For 1 -12 MOB,
 

consultation with National manager- collection and recovery.

 

For 1-12 MOB, the credit officer will be assisting the Loan officer in collection

Bucket 2

Overdue calling (tele-calling unit), field visit and overdue EMI and other applicable charges pick-up will be done by the collection officer.

Tele-calling

(31 to

Manager,

60 DPD)

Collection

Based on severity of the case Cluster collection manager will also visit the customer

Operations

Manager,

The prioritization of collection effort will be normalization first & then stabilization.

Collection

Officer,

If the Cluster collection manager is of the opinion that customer intent is good but ability is impaired and fit case for reschedule, then he will recommend the case to RCM &NCM

Area

Collection

Manager

Credit Bureau scrubs shall be used for all cases >30 days.

The collections operation manager will issue overdue payment reminder notice on the company letterhead (30 DPD Notice)

Bucket 3

Overdue calling (tele-calling), field visit and overdue EMI and other applicable charges pick-up will be done by the collection officer

Tele-calling

(61-90

Manager,

DPD)

Collection

The collection operations manager will issue notice for overdue payment reminder notice on the company letterhead (60 DPD Notice)

Operations

Manager,

Collection

The prioritization of collection effort will be normalization, rollback or stabilization in that order.

Officer,

Area

Based on customer risk profile (POS, Vintage), area collection manager will continue visit the customer

Collection

Manager

If the area collection manager is of the opinion that customer intent is good but ability is impaired and fit case for reschedule, then he will recommend the case to RCM&NCM

Credit bureau scrubs shall be continuously used to observe the payment behavior of Overdue clients

Bucket 4

Overdue calling (Tele-calling team), field visit and overdue EMI and other applicable charges pick-up will be done by the collection officer

Tele-calling

onwards

Manager,

(>90

Collection

DPD)

The prioritization of collection effort will be normalization, rollback or stabilization in that order.

Operations

Manager,

Based on customer risk profile (POS, Vintage), collection manager will continue visit the customer

Collection

Officer,

Collections Operations Manager will issue loan recall notice (LRN)

Area

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February 2017

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Confidential

Confidential to the customer. Collection • Based on the feedback from the collection manager legal action

to the customer.

Collection

Based on the feedback from the collection manager legal action (sec 138/25 of Negotiable instrument/Payment act; sec 9 arbitration, will be initiated by legal manager through empaneled advocate. Any deferral of legal action will be approved by NCM

In some exceptional cases, company will offer/accept settlement to/from the customer as approved by Head of Credit& Collection Micro Finance.

Manager,

Legal Team

3.4. SMS Strategy

Reminder SMS will be sent to all customers before the due date from the LMS

ACH/ ECH/ cheque bounce cases will be flagged in LMS by central Ops. And subsequently SMS will be sent from LMS

Subsequent SMSs to be sent basis increase in DPD bucket using (IC4)

In case of repayment collection done through manual receipts, a SMS confirming the same will be sent to the customer once the payment is accounted in a customer’s loan account.

In future in case of payment received through the handheld, a system generated SMS shall be sent acknowledging the receipt of the same.

3.5. Calling Strategy

Awareness Calling (Calling Before 1 st EMI)

For enhanced customer experience and to ensure minimal operational delinquency towards early tenor of the loans, awareness calling will be done for all customers (based on contactability) post loan disbursement to make them aware of their due EMI amount and the installment date. The benefit of awareness calling is the confirmation of customer contactability at specified contact numbers and pre-empting any customer issues that could have led to customer dissonance. This activity will be carried by Service quality tele-calling team

Pre-Bounce or Reminder Calling

Pre-Bounce and Reminder Calling will be done under 2 circumstances by Service quality tele- calling team

Collection Policy

February 2017

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Confidential

Confidential o For first 4 months, all customers will be called and reminded about their impending

o

For first 4 months, all customers will be called and reminded about their impending due date and requesting them to fund their account before the due date. This is to ensure that customer habit of clearing EMI thru their Ujjivan account is established.

o

After 4 months, only customers who have missed their repayment previous month, but paid within the end-of-month, will be called and asking them to fund their account before due date (so that these accounts will not become overdue post EOM) irrespective of ECS/Cheque or cash mode repayments

Bounce Calling

o Bounce calling will be done to customers whose cheque/ECS/ACH has bounced during the month, insisting them to repay the overdue installment with applicable charges by tele- calling collection team (4 th day)

3.6.

Field Visit Strategy (> 30 DPD)

Prior to field visit, collection team to refer tele-calling trial recorded in IC4

The collector shall visit the customer at his /her residence or work place to establish contact, negotiate and collect the repayment (or take a PTP)

The intensity of the field visit will be based on:

o

Bucket status

o

Principal outstanding

o

Payment behavior in the past

All field visit remarks must be updated in the IC4.

3.7.

Dunning strategy

Reminder notices will be sent to the customer from IC4. Reminder letters for debt collection will serve several purposes

It is alternate soft collection method reminding them for overdue repayment

Since it is documented, it shall serve as an evidence when legal action is initiated

Different types of notices will be sent to the customer as per the below aging:

Reminder Notice

IL

First reminder notice

30th Day

Second reminder Notice

31 to 60 days

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February 2017

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Confidential

Confidential Final reminder and recall notice 61 to 90 Days 3.8. ECS/ACH Representation ECS/ACH representation will

Final reminder and recall notice

61 to 90 Days

3.8. ECS/ACH Representation

ECS/ACH representation will also be done on recommendation by collection/ distribution team and approved by NCM based on data analysis of past customer repayment behavior.

3.9. Legal Strategy

Legal case will be initiated only after 90 DPD (exceptionally before 90 DPD with NCM approval) Legal action will be in parallel with other collection actions (tele-call, field visit, settlement effort, etc)

Different types of legal actions will be initiated as follows -

Arbitration Sec 9 (for all cases except mortgage).

Sec 138/Sec 25

LokAdalat

Conciliation

4. COLLECTION PROCESS FOR HOUSING & MSE

4.1. Introduction

A Loan Officer (LO) shall represent Ujjivan in collection and secured assets repossession. The process would follow the guidelines set out below:

The customer would be contacted ordinarily at the place of his / her choice and in the absence of any specified place, at the place of his / her residence and if unavailable at his / her residence, at the place of business / occupation.

Identity and authority of persons authorized to represent ujjivan for follow up and recovery of dues would be made known to the borrowers at the first instance. Ujjivan staff or any person

Collection Policy

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Confidential

Confidential authorized to represent the USFBLL in collection of dues or / and secured assets, repossession

authorized to represent the USFBLL in collection of dues or / and secured assets, repossession will identify himself / herself and display the authority letter issued by the USFBLL upon request.

The USFBLL would respect privacy of its borrowers.

The USFBLL is committed to ensure that all written and verbal communication with its borrowers will be in simple business language and USFBL will adopt civil manners for interaction with borrowers.

Normally Ujjivan's representatives will contact the borrower between 0700 hrs. to 1900 hrs. Unless the special circumstance of his / her business or occupation requires Ujjivan to contact at a different time.

Borrower's request to avoid calls at a particular time or at a particular place would be honored as far as possible.

Ujjivan will document the efforts made for the recovery of dues and the copies of communication sent to customers, if any, will be kept on record using IC4.

Inappropriate occasions such as bereavement in the family or such other calamitous occasions and important social functions such as marriages will be avoided for making calls / visits to collect dues.

4.2. Collection Strategy

       

CLUSTER

   

CLUSTER

REGIONAL

     

TELE-

SALES

AREA

RB

CREDIT

CREDIT

COLLECTI

CLUSTER

COLLECTIO

BUCKET/DPD

SMS

CALLIN

LO/RO

MANAGE

MANAGE

M

MANAGE

MANAGER

ON

COLLECTION

N

G

R

OFFICER

MANAGER

MANAGER

R

R

0 to 30 Days

 

! !

 

! !

X

X

!

X

X

X X

 

31

to 60 Days

 

! !

 

! !

! X

 

!

X

!

! !

 

61

to 90 Days

 

! !

 

! !

! !

 

!

!

!

! !

 

91

to 180 Days

 

! !

 

! !

! !

 

!

!

!

! !

 

>180 Days

 

! !

 

! !

! !

 

!

!

!

! !

 

Note: Field collections will involve for cases after 30 days of delinquency once it is crossed >12 MOB

The action plan for collection will vary depending on the reasons of default. Accordingly, defaults are broadly classified as:

# Individual Defaults

# Technical Defaults

# Defaults caused due to Fraud/Skip

Type of Default

Action Plan

Person Responsible

Collection Policy

February 2017

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Confidential

Confidential Type of Default Action Plan Person Responsible Individual Defaults Temporary repayment problem

Type of Default

Action Plan

Person Responsible

Individual Defaults

Temporary repayment problem

Cases shall be visited, situation assessed and collection to be made within 30 days.

Loan Officer/Relationship Manager & Program Manager

Long – term repayment problem

Process shall vary basis the cause of default.

 

Technical Defaults

Wrong Posting of Account

Branch shall intimate the operations department to have the issue rectified.

Branch& Back end team

Default caused by Fraud/Skip

Default caused by fraud

Cases shall be investigated and reported. Collection &Vigilance and RBM/RCM shall initiate action against staff/ customer

CBH/Cluster Credit Manager

Default caused by Skip

Case need to be allocated to Field collections & need to trace by using all the available technique/Resources. Sales/collections & Vigilance should jointly work on resolving such cases

CBH & AM, Collection Officers, Collection Manager & Vigilance manager

4.3.

Bucket wise collection strategy

 

Bucket

Activities

 

Staff Responsible

Bucket 1 (1 to 30 Days)

Missed payment/Bounce SMS sent from IC4

Tele-calling Manager, Collection Operations Manager, CBH, Cluster Credit Manager, Loan Officer, Credit Officer

1

to 3 days: Loan officer/relationship office to

visit/ call the customer to obtain PTP/ re- payments and update in IC4.

 

>3 days: bounce calling from the collections tele- calling set-up to obtain PTP and relationship

officer to ensure re-payment is picked. In case the customer has not honored the PTP for more than

 

times the account will be escalated to next 2 supervisory levels in business.

3

In case the customer is temporarily not

Collection Policy

February 2017

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Confidential

Confidential   contactable for 3 consecutive field visits the account shall be allocated to next 2
 

contactable for 3 consecutive field visits the account shall be allocated to next 2 levels in distribution and credit officer for mandatory field visit.

 

Focus is to normalize the account, and ensure corrective action for no future delinquency of the case

Based on the request from distribution in IC4 ECS/Cheque/ACH representation will be done by collection operation manager in consultation with NCM

For 1-12 MOB for IL, the credit officer will be assisting the relationship officer in collection

Bucket 2 (31 to 60 DPD)

Overdue calling (tele-calling unit), field visit and overdue EMI and other applicable charges pick-up will be done by the collection officer.

For <12 Mth MOB Team responsible will be – RBM, RCM, CCM, CBH, LO,CO Tele-calling Manager, Collection Operations Manager,

Based on severity of the case cluster manager - collections will also visit the customer

The prioritization of collection effort will be normalization first & then stabilization.

If the cluster manager - collections is of the opinion that customer intent is good but ability is impaired and fit case for reschedule, then he will recommend the case to RCM & NCM

Filed collection team will involve after >12 MOB - Collection Officer, Area Collection Manager

Credit Bureau scrubs shall be used for all cases >30 days.

The collections operation manager will issue overdue payment reminder notice on the company letterhead (30 DPD Notice)

Bucket 3

Overdue calling (tele-calling), field visit and overdue EMI and other applicable charges pick-up will be done by the collection officer

For <12 Mth MOB Team responsible will be – RBM, RCM, CCM, CBH, LO,CO Tele-calling Manager, Collection Operations Manager,

(61-90

DPD)

The collection operations manager will issue notice for overdue payment on the company letterhead (60 DPD Notice)

The prioritization of collection effort will be normalization, rollback or stabilization in that order.

Filed collection team will involve after >12 MOB Collection Officer, Area Collection Manager

Based on customer risk profile (POS, Vintage), area collection manager will continue visit the

Collection Policy

February 2017

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Confidential

Confidential   customer   • If the collection manager is of the opinion that customer intent
 

customer

 

If the collection manager is of the opinion that customer intent is good but ability is impaired and fit case for reschedule/rehabilitation, then he will recommend the case to RCM & NCM

Credit bureau scrubs shall be continuously used to observe the payment behavior of Overdue clients

The collections operation manager will send2nd overdue payment reminder notice on the company letterhead

Bucket 4

Overdue calling (Tele-calling team), field visit and overdue EMI and other applicable charges pick-up will be done by the collection officer

For <12 Mth MOB Team responsible will be – RBM, RCM, CCM, CBH, LO,CO Tele-calling Manager, Collection Operations Manager,

onwards

(>90 DPD)

The prioritization of collection effort will be normalization, rollback or stabilization in that order.

Based on customer risk profile (POS, Vintage), collection manager will continue visit the customer

Filed collection team will involve after >12 MOB Collection Officer, Area Collection Manager Filed collection team will involve after >12 MOB

Legal Manager

Collections operations manager will send loan recall notice (LRN) for cases>90 days.

Based on the feedback from the collection manager legal action (sec 138/25 of Negotiable instrument/Payment) will be executed through our legal team

For MSE demand promissory Note can be invoked through claiming legal suite on recommendation from collection manager

 

Based on the feedback from the collection manager SARFESI for secured loan will be initiated by legal manager through empaneled advocate. Any deferral of legal action will be approved by NCM

In some exceptional cases, company will offer/accept settlement to/from the customer as approved by Head Secured/MSE business on recommendation from NCMs

4.4. SMS Strategy

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February 2017

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Confidential

Confidential • Reminder SMS will be sent to all customers before the due date by the

Reminder SMS will be sent to all customers before the due date by the LMS

ACH/ ECH/ cheque bounce cases will be flagged in LMS by central Ops. And subsequently SMS will be sent from LMS

Subsequent SMSs to be sent basis increase in DPD bucket using (IC4)

In case of repayment collection done through manual receipts, a SMS confirming the same will be sent to the customer once the payment is accounted in a customer’s loan account.

In future in case of repayment received through the handheld, a system generated SMS shall be sent acknowledging the receipt of the same.

4.5. Calling Strategy

Awareness Calling (Calling Before 1 st EMI)

For enhanced customer experience and to ensure minimal operational delinquency towards early tenor of the loans, awareness calling will be done for all customers (based on contactability) post loan disbursement to make them aware of their due EMI amount and the installment date. The benefit of awareness calling is the confirmation of customer contactability at specified contact numbers and pre-empting any customer issues that could have led to customer dissonance. This activity will be carried by Service quality tele-calling team

Pre-Bounce or Reminder Calling

Pre-Bounce and Reminder Calling will be done under 2 circumstances by Service quality tele- calling team

o

For first 4 months, all customers will be called and reminded about their impending due date and requesting them to fund their account before the due date. This is to ensure that customer habit of clearing EMI thru their Ujjivan account is established.

o

After 4 months, only customers who have missed their repayment previous month, but paid within the end-of-month, will be called and asking them to fund their account before due date (so that these accounts will not become overdue post EOM) irrespective of ECS/Cheque or cash mode repayments

Bounce Calling

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February 2017

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Confidential

Confidential o Bounce calling will be done to customers who se cheque/ECS/ACH has bounced during the

o Bounce calling will be done to customers whose cheque/ECS/ACH has bounced during the month, insisting them to repay the overdue installment with applicable charges by phone USFBL collection team (4 th day)

4.6.

Field Visit Strategy (> 30 DPD)

Prior to field visit, collection team to refer tele calling trial recorded in IC4

The collector shall visit the customer at residence or work place to establish contact, negotiate and collect repayment (or take a PTP)

The intensity of the field visit will be based

o

Bucket status

o

POS Status

o

Payment behavior in the past

All field visit remarks must be updated in the IC4.

4.7.

Dunning strategy

Reminder notices will be sent to the customer from IC4. Reminder notice for debt collection will serve several purposes

It is alternate soft collection method reminding them for overdue repayment

Since it is documented, it shall serve as an evidence when legal action is initiated

Different types of notices will be sent to the customer as per the below aging:

Reminder Notice

 

SHL & MSE

First reminder notice

30th Day

Second reminder Notice

31

to 60 days

Final reminder and recall notice

61

to 90 Days

Sec 138/25 NIA

>90 Days

SARFESI for SHL

>90 Days subsequently

* All the letter/notice formats are enclosed as annexure to this policy

4.8. ECS/ACH Representation

ECS/ACH representation will also be done on recommendation by collection/ distribution team and approved by NCM based on data analysis of past customer repayment behavior.

4.9. LEGAL STRATEGY

Collection Policy

February 2017

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Confidential

Confidential • For certain defaulting accounts, if other collection efforts are not successful or not advisable

For certain defaulting accounts, if other collection efforts are not successful or not advisable due to sensitivities of relationship or adverse publicity, the collections manager may initiate legal action though Vigilance/Legal department

For carrying out legal activity, the collections manager will designate an officer to be in charge of the legal activity.

For legal action, specific approved lawyers will be identified and empaneled

Legal action may be initiated under Civil/DRT and/or criminal procedure code as appropriate to the facts of the case.

The collection unit may use the option of sending legal conciliation letters/ Loan recall notices to specific customers given the stage of delinquency and feedback from Tele- calling/ field.

The following legal strategy will be used for customers

>=60 DPD - Send notice under Section 138 of Negotiable Instruments Act (Check Bounce) & Execution of Demand Promissory Notes as per NI act. Once declared NPA initiate proceedings DRT / SARFESI However, there may be instances where the unit may not file legal cases under Civil / DRT. These will be

All cases where account; balance is low.

Where payment has been received in the last three months.

Where there is a settlement / negotiation in progress.

Legal activity will be monitored and reported through monthly reports giving:

Fresh cases filed in the month

Cases resolved in the month and therefore

Cases in progress

The report will also indicate the amount recovered in the resolutions obtained in the month. The report will be reviewed by the Regional Collections Manager. The legal officer should also review progress of cases by lawyers and by type of cases.

In view of the differing court procedures in various locations, it is recommended that procedure details be maintained at each location by the legal cell in-charge.

Legal action will be initiated under Sec 138, Civil/Criminal procedure codes based on the following parameters viz bucket, principal outstanding, check amounts and collection history.

The collections unit may also send Conciliation letters to specific customers who threaten to declare bankruptcy or who, because of a life event (eg: illness/divorce/ loss of job, etc.), no longer

Collection Policy

February 2017

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Confidential

Confidential have the financial capacity to pay their debts. The collections unit may use Conciliatory proceedings

have the financial capacity to pay their debts. The collections unit may use Conciliatory proceedings to provide credit counseling to such customers.

4.10. Recovery & Resolution Mechanism

Continuous and focused follow up on a daily basis is the underlying principle for good recovery and also for identifying genuine problems of the borrowers so that timely assistance can be extended to correct any temporary mismatch of the cash flow/ review of repayment schedule etc.

Endeavour should be to prevent the asset from becoming NPA rather than applying remedial measures at post NPA stage.

Timely restructuring / rehabilitation in deserving cases should be ensured.

In exceptional cases, USFBL may opt for One Time Settlement where chances of entire recovery are remote / time consuming.

USFBL may consider Sale of NPA assets to USFBLs/FIs /Asset Reconstruction Companies.

USFBL will enforce the provisions of identifying and declaring willful defaulters in accordance with RBI guidelines 4 . General consistency in approach is expected while dealing with willful defaulters.

Approach for recovery should be practical and non-prejudiced. Fair treatment and persuasion are the basic principles of recovery mechanism. Enforcement of security be undertaken only where restructure / rehabilitation has failed or impossible

The recovery mechanisms for retail products like LAP, Individual/Personal Loans will be as mentioned in section 4.4 of this policy

The recovery mechanisms for MSEs will include Rectification & Restructuring and in case these options are seen as not feasible, due recovery options will be resorted to as stated in section 4.4 of this policy

4.11. Engagement of Recovery Agents 5

When Ujjivan prefers to utilize the services of recovery agents for collection of dues and repossession of securities, Recovery agents will be appointed as per the regulatory guidelines 6 issued in this regard in this respect:

4 Master Circular on Wilful Defaulters

https://www.rbi.org.in/Scripts/BS_ViewMasCirculardetails.aspx?id=9044
5

"Agent" in this Policy would include agencies engaged by the SFB and the agents / employees of the concerned agencies.

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Confidential

Confidential ► The name and address of all Recovery Agents on Ujjivan’s approved panel will be

The name and address of all Recovery Agents on Ujjivan’s approved panel will be placed on their website for information.

Only recovery agents from the approved panels will be engaged by Ujjivan.

In case USFBL engages service of such recovery/enforcement/seizure agent for any recovery case, the identity of the agent will be disclosed to the borrower.

Agents would be provided with an Identity card (from the recovery agent) for proper identification and shall limit his role of recovery of dues specifically entrusted to them. Any action beyond limits of law shall be at Recovery Agents’ sole risk and responsibility.

The Recovery Agents shall strictly adhere to the USFBL’s Model Code of Conduct for Collection of dues and Repossession of Secured Assets.

The arrangement of placing Recovery Agents' name on the panel does not amount to any employment and create no obligation of any kind on the USFBL.

Representatives proposed to be identified as Agent, should have undergone necessary training and obtained the prescribed certificate from IIBF as per RBI guidelines.

Recovery Agency shall keep all the affairs of entrusted borrowers highly confidential.

The Agency shall not have any right to sub-delegate or appoint any sub-agent.

4.12. Identification of Wilful Defaulters

As per the scheme framed by RBI with effect from 01.04.1999 7 , USFBLs/FIs are required to submit the list of suit filed accounts of willful defaulters of` Rs.25 lac and above as at end of every quarter to Credit Bureaus and/or any other credit information company of which it is a member and the quarterly list of willful defaulters of Rs.25 lac and above where suit has not been filed to RBI.

Classification of willful defaulter by Ujjivan for internal purposes:

Ujjivan shall classify willful defaulters irrespective of the amount outstanding, for internal purposes. The term "willful default" in accordance with RBI guidelines 8 would be deemed to have occurred if any of the following events is noted:

6 RBI Circular on Recovery Agents engaged by Banks

https://www.rbi.org.in/commonman/English/Scripts/Notification.aspx?Id=347
7

https://www.rbi.org.in/Scripts/BS_ViewMasCirculardetails.aspx?id=9044
8

RBI Master Circular on Wilful Defaulter

Refer RBI Master Circular on Wilful Defaulter

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Confidential

Confidential The borrower/ unit has defaulted in meeting its payment/repayment obligations to the lender even when

The borrower/unit has defaulted in meeting its payment/repayment obligations to the lender even when it has the capacity to honor the said obligations.

The borrower/ unit have defaulted in meeting its payment/repayment obligations to the lender and have not utilized the finance from the lender for the specific purposes for which finance was availed of but has diverted the funds for other purposes.

The unit has defaulted in meeting its payment/repayment obligations to the lender and has siphoned off the funds so that the funds have not been utilized for the specific purpose for which finance was availed of, nor are the funds available with the borrower/unit in the form of other assets. For the purpose of determining future course of action in an account, the guiding principle will be the intention of the borrowers concerned. Willful defaults broadly cover the following:

Deliberate non-payment of the dues despite adequate cash flow and good net worth;

Siphoning off of funds to the detriment of the defaulting unit;

Assets financed either not been purchased or been sold and proceeds have been mis-utilized;

Misrepresentation/falsification of records;

Disposal/removal of securities without USFBL's knowledge;

Fraudulent transactions by the borrower.

Absconding from current residence without giving any prior notice to Ujjivan.

Involvement in sub lending activity by the borrower.

As and when accounts is classified as NPA or on occurrence of any of the events noted above in an existing NPA account, collection team shall examine whether same is a case of willful default.

Internal Committee for approving list of willful defaulters:

A Sub Committee for ‘ The Risk management committee of the board’, constituting Chief Risk Officer, Head of Credit and Collections – Microfinance, Head of Credit - Housing & MSE and MD & CEO shall be the final authority to approve the list of willful defaulters for POS Rs 0.5 lacs to Rs 25 Lacs.

System tracking:

The complete list of willful defaulters shall be shared with corporate credit team once in a month for updation in internal systems as negative customer.

Classification of accounts as willful defaulter with outstanding balance >Rs 25 Lacs 9

9 These guidelines shall be adopted when Ujjivan start lending loans >Rs 25 Lacs

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Confidential As and when any borrower account with an outstanding balance of INR 25 lac and

As and when any borrower account with an outstanding balance of INR 25 lac and more is classified as NPA or on occurrence of any of the events noted above in an existing NPA account, branch/RO shall examine whether same is a case of willful default in terms of RBI guidelines and in case of willful default, take prompt steps to get the borrower classified as a willful defaulter, as per the procedure laid down hereunder.

1. The proposal for classification of willful defaulters shall be forwarded by branch/regional officer (RO) to Legal Department at Head Office substantiating the reasons and also supported by documentary proof.

2. Branch/Controlling Office should examine and obtain legal opinion as to whether there is prima facie case warranting criminal prosecution under penal law and forward their recommendation to Legal Department at Head Office

3. The matter shall be examined from the legal angle and placed to the Willful Defaulters Identification Committee 10 . The committee will be the Sub Committee of ‘Risk management committee of the board’, constituting Chief Risk Officer, Head of Credit - Housing & MSE and MD& CEO.

4. If in the opinion of the committee, the case is fit for prosecution, sanction shall be accorded for initiating criminal proceedings

5. It should be ensured that penal provisions are used effectively and determinedly but after careful consideration and due caution.

6. The decision taken on classification of willful defaulters should be well documented and supported by requisite evidence. The decision should clearly spell out the reasons for which the borrower has been declared as willful defaulter vis-à-vis RBI guidelines 11 .

7. A Show Cause Notice will be issued to the borrower with a call for submissions. Subsequently, an order will be issued recording the fact of willful default as well as reasons for the same.

8. Reporting of willful defaulters to authorities like RBI/ Credit Bureaus etc., shall be done as per the RBI/Credit Bureaus etc., guidelines in this regard.

The system of dissemination of credit information pertaining to willful defaulters was put in place for cautioning USFBL and FIs, so as to ensure that further finance is not made available to them.

Hence, the above scheme is a very important tool which can be effectively used against the willful defaulters of Ujjivan, to persuade them to settle their dues.

10 As per RBI Master Circular on Wilful Defaulters RBI/2015-16/100 DBR.No.CID.BC.22/20.16.003/2015-16 dated July 1, 2015, the “Committee will be headed by an Executive Director or equivalent and consisting of two other senior officers of the rank of GM / DGM”.

https://www.rbi.org.in/Scripts/BS_ViewMasCirculardetails.aspx?id=9907
11

RBI Master Circular on Wilful Defaulters RBI/2015-16/100 DBR.No.CID.BC.22/20.16.003/2015-16 dated July 1, 2015

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Confidential 4.13. Tools for Recovery The repayment record of borrowers shall be monitored both with regard

4.13. Tools for Recovery

The repayment record of borrowers shall be monitored both with regard to payment of interest and repayment of principal. Whenever a borrower defaults or is likely to default, rigorous follow-up shall be made for the collection of dues / arrears. When default occurs, oral and written communications are to be sent to the borrower to regularize their accounts within a specified period. In case the loan is secured by a guarantee (personal or corporate), steps shall be taken to recover dues from the guarantor.

Ujjivan shall use any of the following broad methods for management of problem accounts:

1. Restructuring, rephasement and rehabilitation

2. Exit strategy

3. Settlement/ Compr