In any finance company or bank, debt collection takes the back seat till losses mount to a rate higher than profitability. Typically, debt-collection is restricted to a small team reporting to sales structure.
As mentioned elsewhere, inaccurate customer accounts lead to a lot of confusion, erosion of brand image leading to lower sales and high delinquency & losses. In a decentralised set up, accurate accounts are almost impossible. Technology needs to be put to use to ensure that customer accounts are accurate to avoid systemic risk. That would ensure the right delinquency reports. In fact, delinquency reports may have to flow from central system to avoid any manipulation to delinquency rate/ collection rate. I am aware that in at least 4 large finance companies in India
Things are different in MNC banks and finance companies. There is a lot of importance given to debt collection and credit underwriting. Most importantly, both collection and credit department are placed under a single head, making him/ her responsible for any delinquency and losses. Bad credit and frauds are major reasons for creation of delinquency. Some external factors like dramatic change of economic conditions, natural calamity, etc. may contribute to delinquency and consequently to losses. Placing credit and collection under the same department would avoid systemic risk of passing of bucks and bring the necessary credit control leading to lower losses.
The companies need to put down in clear terms the credit policy and revisions if any very systematically and let all departments know on monthly basis so as to avoid sourcing bad files.
