Akshat Mittal, an entrepreneur based in Delhi, had taken a home loan from Bajaj Finance a few months ago. While he received the sanctioned amount from the company, he said that he was charged an extra amount for an insurance scheme which he did not apply for.
“When my first equated monthly installment (EMI) was deducted, I saw they had charged me for insurance. When I reached out to them on email, they ignored my email,” Mittal said.
Mittal filed a case in the Rohini Consumer Court in Delhi. “When I called Bajaj Finance,” Mittal said, “they admitted their fault when they did not inform me about the insurance. When I told them to take back the insurance linked to my loan, they refused to do so and sometimes started speaking loudly with me.”
“Additionally, I get 2-3 calls daily from Bajaj Finance but they do not respond to my queries,” Mittal added.
Another customer, Rana Dutta, a Mumbai-based entrepreneur, recently took to Twitter to reveal that he gets five calls every day from the representatives of Bajaj Finance, a leading non-banking company, despite not being a customer of the company. “Every day I block at least 5 calls from Bajaj Finance and their remedy is to register with their do not disturb (DND). After not sharing or using any product of theirs if this is what I am subjected to at any hour every day, I am sure if I share my number they will harass me to death,” Dutta tweeted.
These are not isolated incidents. “On an average I get around 10 text messages and 4-5 calls every week from Bajaj Finance and other NBFCs pushing loans and credit cards,” says Subhash, a finance industry professional from Mumbai. “Every time you block a number, the call comes from a different number.”
Widespread menace
To be sure, this kind of aggression is widespread in the NBFC industry. Moneycontrol had published a series of stories highlighting the problems caused by loan recovery agents. Earlier, Moneycontrol had also reported that Navi Finance and other digital lenders were accused of stealing borrowers’ phone books to harass their contacts for loan recovery.
Incessant calls pitching loans and vicious recovery agents pursuing defaulters are two shady aspects of India’s shadow banks. There have been multiple complaints on social media recently about alleged harassment by representatives from Bajaj Finance and other NBFCs via calls, messages and emails, and particularly about the arm twisting loan recovery methods employed by its agents.
Also read: Loan app harassment cases on the rise in Mumbai, 4 FIRs registered in 4 days
Bajaj Finance isn’t just another non-banking finance company (NBFC) operating in India’s Rs 31 trillion NBFC industry. Promoted by the Bajaj Group, it is bigger than many full-sized banks. With total assets of Rs 2.3 trillion and a market share of nearly 8 percent among NBFCs, Bajaj Finance is the largest shadow bank in Asia’s third-largest economy, with a customer base of 6.6 crore and 3,504 branches. The firm offers home, auto and personal loans, in competition with banks and other NBFCs.
Also read: After Hazaribagh incident, Mahindra vows to review practice of using third-party collection agencies
Company response
Responding to a query from Moneycontrol on the allegations of harassment by its recovery agents, Bajaj Finance claimed that its hands were clean. “Bajaj Finance has a robust code of conduct policy as laid down by the regulator, which includes communication, behavioral and situational training of its recovery partners. It adopts a zero tolerance policy for any non-compliance,” the company claimed.
The company also claimed to have deeply invested in customer service infrastructure and said it has a well-laid-down customer redressal management process.
Customers have a different take.
Pashupati Davella, an entrepreneur based in Bengaluru, complained about being flooded by unsolicited mails from Bajaj Finance. “I have been getting unsolicited mails from Bajaj Finance about approval of loan, RBL card, one-time password (OTP) generation, etc. I never applied for these. Afraid recovery agents would trouble me. Cannot reach Bajaj as their IVR and website have no option to complain. Help,” Davella tweeted.
But for Prameela Jangam, a Bajaj Finance customer from Hyderabad the case is different. Recovery agents, Jangam said, are harassing her and her family members by calling them and using abusive language.
“I delayed on repayment and the recovery agent, Chandu, is harassing me to death. Please take necessary action on the recovery agents and their abusive language,” Jangam tweeted and tagged Hyderabad City Police.
To this, the police responded and asked for her residential and other details.
“Bajaj recovery agent is calling all my references and threatening all of us that he is a very big goon in his area. Please save me from your agent,” Jangam said.
In most cases, recovery agents are third-party companies appointed by originating companies, the lenders. The agents often use strongarm methods to recover dues from the borrower. Typically, they engage in shaming the targets by harassing them in front of family and friends, even pushing some customers to take extreme steps.
In the past, the Reserve Bank of India (RBI) has warned against such practices several times.
An email sent to the RBI seeking comments for this story remained unanswered till the time of filing this copy.
What’s behind the aggression?
Part of the reason for the aggressive campaign both on recovery and sales could be the increasing competition faced by large NBFCs such as Bajaj Finance from their rivals and the consequent fear of losing market share, said analysts.
Recently, brokerage firm Ambit said that Bajaj Finance was facing multiple challenges to gain scale amid strong competition in the home loan market and its growth could be slowing due to size and competition.
The simmering competition is likely to exert pressure on Bajaj Finance's asset growth, wrote Ambit Capital. The brokerage has put a ‘sell’ rating on the stock with a target of Rs 5,028 apiece. The company’s shares were last trading at Rs 5,933.90 on April 17, 2023 on BSE, up 0.5 per cent from the previous close, while benchmark equity index, Sensex was trading 720 points or 1.19 per cent down from previous close .
“Bajaj Finance’s one-year forward valuation implies 25 percent AUM (assets under management) growth with 20 percent RoE (return on equity) over the next decade. Despite superior technology, analytics, processes and distribution, it’s a tall task,” Ambit Capital said in a report, adding that no Indian lender has grown at a rate of more than 20 percent in the past two decades.
In the third quarter, Bajaj Finance added 3.1 million new customers, which was 21 percent higher than a year ago and 19 percent up sequentially.
The lender, in its January-March 2023 quarter update, reported only a 20 percent growth in new loans. The company’s deposit book, for the quarter ending March 2023, stood at approximately Rs 44,650 crore, a growth of 45 percent from Rs 30,800 crore, in the corresponding quarter last year.
The fastest-growing segments, based on AUM growth, were loans against securities, loans to small businesses and commercial lending. All these segments grew 33-46 percent in the third quarter, while two and three-wheeler finance was the slowest segment, growing just 11 percent year-on-year.
On the asset quality front, there aren’t any worries going by the numbers. In the third quarter, Bajaj Finance reported a gross bad loan ratio of 1.14 percent, down from 1.73 percent a year ago.
Fear of losing market share?
Experts said that even financially healthy companies opt for aggressive recovery methods fearing loss of dominance in business and the possibility of a slowdown ahead.
“When companies see that a recession is likely to come, they turn to these methods as a recourse for quick loan recovery,” said Abhishek Bansal, Founder Partner, Acumen Juris, a consultant company.
Also, lack of control over functioning of third-party recovery agencies tends to lead to cases of harassment, said experts. Critical aspects, such as the agency’s professional history, debt recovery agent (DRA) license, etc. are sometimes not verified by lenders, they say.
“Companies ignore due diligence on the DRA licensing when hiring a third-party recovery agent. Due to this, the agents indulge in aggressive recovery activities,” said Varun Sharma, Executive, FinGuru Services India, a non-banking financial company (NBFC) consultant company.
This gives a free hand to recovery agents to opt for methods such as visits to the borrower's residential place, harassment over telephone, etc, they said.
An ex-employee of an NBFC, who did not wish to be named, said such companies have a dedicated team for loan recovery. “There is a special collection team that works only to recover loan amounts from borrowers. They connect with borrowers on calls and sometimes visit their homes for recovery,” the person said.
The call centres
In most cases, incessant phone calls for recovery were the common complaint. This, experts said, is due to the call centres set up for this special purpose.
Call centres associated with NBFCs typically employ hundreds and sometimes thousands of executives and are paid a monthly salary ranging between Rs 40,000 and Rs 80,000, according to industry experts.
Their mandate: keep chasing potential target customers with text messages and calls and generate ‘leads’ that can be passed on to the sales team.
Ram Rastogi, Chairman, Fintech Association for Consumer Empowerment (FACE), a consumer-centric organisation, said these call centres operate mostly in semi-rural and rural areas and also work round the clock to recover loans from borrowers.
“There have been cases where call centre executives threaten to leak borrowers’ photos by morphing them. Borrowers who are illiterate often fall in this trap and pay the loan amount with interests of more than 100 percent at times,” Rastogi said.
These recovery methods, Rastogi added, are executed by recovery agencies and often the lender is kept in the dark. “But it is the responsibility of the lender to see what methods are followed by their recovery partners,” Rastogi said.
Moneycontrol spoke to several call centre employees associated with various NBFCs. One employee, who did not wish to be named, said they are given daily targets. “The target includes calling customers for repayment of loans. Our team has more than 100 members only for Bajaj Finance. We are told to complete our daily targets by calling customers repeatedly,” the call centre employee said.
The modus operandi
Calls are made to the borrower and also to friends, relatives, etc. of the borrower. Often, these are folks who, during the documentation of the loan, act as guarantors for situations where the borrower is unable to repay the loan amount. But in some cases, calls are also made to people who have nothing to do with the loan.
Typically, companies ask for emergency contacts during the paperwork. The number of emergency contacts asked could vary from one to three. This method is transparent as the borrower as well as the lender are on the same page.
But a second method, experts said, involves extracting and storing the contact details of the borrower through mobile applications.
“Lenders store contact details of borrowers using backend technology through mobile applications. The companies later use these contacts to call people to recover the loan from the borrower,” Sharma explained.
RBI guidelines do not allow storage of contacts of relatives, friends, etc. of borrowers, but in some cases, companies that publicly deplore the strong-arming of borrowers tacitly give their assent to recovery agents cornering targets.
What do RBI regulations say?
The Reserve Bank of India (RBI) has, from time to time, issued directions to banks on recovery agents and the code of conduct needed for recovery practices.
On February 14, the RBI said digital lenders must share the details of the recovery agent if a loan turns delinquent.
“If the loan turns delinquent and the recovery agent has been assigned to the borrower, the particulars of such recovery agent assigned must be communicated to the borrower through email/SMS before the recovery agent contacts the borrower for recovery,” the RBI said in an FAQ on digital lending guidelines.
Also, at the time of loan sanction, the borrower may be given the names of empanelled agents authorised to contact the borrower in the event of a default, the RBI said.
On a similar note, the apex bank had in August 2022 barred recovery agents from intimidating borrowers and calling them before 8 am or after 7 pm. While issuing additional instructions to regulated entities, the RBI said it had observed that recovery agents were deviating from its instructions with regard to recovery practices.
"It is advised that the REs (regulated entities) shall strictly ensure that they or their agents do not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts," the RBI said in the notification.
As things stand, that instruction, it appears, is being honoured in the breach.
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