Ensuring Dignity of Borrowers Via Compliance in Debt Collection

With the patterns in debt collection space evolving critically, adopting effective AI and ML capabilities aids in achieving compliance, thereby, retaining the dignity of borrowers.                                                           

FREMONT, CA: The debt collection industry in the APAC space is valued at a plausible rate and is anticipated to grow by 18 per cent annually in the future. However, debt support and risk mitigation themes are often subjected to varied potential challenges, like a large turnaround time, undignified collection methods, and poor or manhandling grievances. The Reserve Bank of India (RBI) stated that a lack of awareness can likely be noticed among bankers and recovery agents, who often deviate from recovery guidelines. Thus, it enlisted the potential for following patterns among banks, non-banking financial companies (NBFCs), and asset reconstruction companies (ARCs).

As a result, the RBI has enforced its compliance scrutiny in the economy over lending institutions to enforce greater adherence to the debt recovery process. It accepted and implemented the working group on digital lending's (WGDL) recommendations. They stated that loan disbursal and repayments often ought to be executed between regulatory entities (REs) and borrowers on a direct basis, eliminating third-party role play in the arena. This, in turn, directs lenders to set a cooling-off period in the loan contract, enabling the payment of the principal amount and annual percentage rate (APR) by borrowers with no penalty.

Generally, lenders send legal notice to defaulting borrowers containing the particulars of the borrower and the time limit for debt payment, in addition to the signatures of the advocate and the lender. Wherein, sending legal notices via email often ends up in spam folders, and those sent via postal mail may end up not reaching recipients. Digitisation has tamed the lifestyle of human beings on a critical scale, where leveraging tech-based solutions to deliver legal notices for defaulted borrowers shares the data in real time, thereby making the process easily accessible.

Deploying robust innovative technologies into applications and solutions assists lenders in connecting with borrowers in no time via artificial intelligence (AI) and machine learning (ML) capabilities. These digital communication tools facilitate distinct lender compliance, promoting transparency and dignified best collections through individualised legal notices for varied account numbers. It also encompasses the automation of centralised tracking and effective communication of the case status. The debt collection process is highly sensitive and challenging and may often lead to lawsuits, where lenders ought to recover their debts with a critical safeguard of individual rights and established dignity. Wherein, deploying AI, robust communication tools, and ML-backed solutions holds a crucial role in streamlining debt collection and eliminating challenges that may arise in promoting compliance and collaboration.