Recovery agents aka 'Vasooli'

Earlier tonight there was a story on NDTV Witness about the dark underbelly of the Indian credit card market. What with the credit card debt rising to an astonishing Rs. 14,000 crores! Its hard to comprehend those kind of numbers.

One of the points they covered was the the methods of recovery being employed by some private sector banks. All this in the light of a recent report of a man driven to suicide after being hounded by recovery agents hired by ICICI Bank. In very crude terms it amounted to 'vasooli'.

These unscrupulous methods of recovering debt have always been prevalent in the world of private (non-institutional) or even unlicensed financing. These methods are the only recourse to recovery in case of defaulting when there is nothing mortgaged or put up as a security against the borrowing. But then the borrowers in these cases are mostly people who would be generally classified as non-credit worthy per say on paper.

What is worrying is that these methods are slowly finding their ways into the mainstream debt recovery system. One can include both borrowing and credit card debts into this category. Having borrowed money or used the credit card in the first place, the individual is obliged to repay the money to the bank. So a certain degree of blame lies with the party for taking on more debt than one can handle.

But we also need to look at the other side of the reason as to why people are so easily riddled with debt. We have all been hounded at some point by those infamous tele-marketers urging us to buy everything from insurance to falling for that 'free' trip to a destination of our choice. Overzealous marketers and credit card companies are almost compelling people to sign up for credit cards with hard sell. And a lot of times verification becomes secondary to selling a credit card.

Pre-approved loans being offered to people who do not have the capacity to repay them. Offer anybody easy money and they are more than likely to fall for it. So you end up with people using credit cards and availing pre-approved loans way beyond their capacity to repay. And there you have defaulting and then comes the debt recovery.

So I think the fault lies on both the sides. The greedy, sometimes gullible, borrowers and overzealous banks and credit card company executives with 'targets' to meet.