Sales are important; it is highly competitive as well. Marketing team is under pressure all the time to churn higher numbers, because a portion of it makes higher profit.
Everybody loves profit; it is an important KPI/ KRA for the top guy and the company.
Marketing team is eager to get customer from anywhere, even too far away place from the branch. With aggressive Direct Marketing Agents pushing very hard their files, Branch and Regional managers get too submissive and accept the files.
As long as these accounts do not turn delinquent, there is hardly an issue. But, it will not be so; delinquency is a part of the lending business. Delinquency level is high with such remote accounts because of bad banking culture and inefficient collection created by the distance.
“Out of sight, out of mind” is true with these accounts; the author had first hand experience with such accounts. Hardly any field collector ever visited high delinquent customers located remotely. The common excuse is that they do not get time; it takes the whole day to meet one customer; and there are other urgent issues.
Senior guys when they are on field visits may focus on these remote accounts.
Senior guys when they are on field visits may focus on these remote accounts.
High delinquency and losses have high positive correlation. Invariably, these accounts suffer certain degree of loss.
So, it is better to have the following restrictions:
1. Not to consider prospects located beyond 100 Kilometers from the branch; it should be possible for a field collector to visit such a place in 2 hours by personal vehicle.
2. One can make exceptions to customers whose credit history and experience is already available with the lender.
3. One may consider prospects with regular income like: salary, interest, pension, etc., which could be verified from bank statements.
4. In any other case, LTV should not exceed 50%; higher customer equity in the asset ensures semblance of repayment discipline.
5. No ‘used vehicle’ must be financed to remote prospects.
However, wholesale finance and high value machinery finance need not have any restriction.
If the company is a captive, hardly any one can force any limits on area, sales and loss as well.
