By Manavjeet Singh, MD & CEO, CLXNS
Technology is playing a significant role in reducing the unethical loan recovery scenario in India. The unethical loan recovery process, also known as “loan shark” activities, has been prevalent in India for a long time. In the past, loan recovery agents would use forceful means to recover money from borrowers who were unable to pay their debts. However, technology is now being used to create a more transparent and ethical loan recovery process.
One of the main ways technology is helping to curb the unethical loan recovery scenario in India is through the use of digital payment systems. Digital payment systems allow borrowers to make payments online, reducing the need for physical interaction with loan recovery agents. This reduces the chances of physical intimidation, harassment, or violence by loan recovery agents towards borrowers who are unable to pay their debts. Digital payment systems also provide a transparent record of transactions, which can help prevent disputes or disagreements between borrowers and loan recovery agents.
In the latest update in the Google Play Store policy, Google is set to restrict apps that offer loans to individuals from accessing user data such as photos, videos, contacts, precise location, and call logs.
Another way technology is helping to curb the unethical loan recovery scenario in India is through the use of big data analytics. Loan recovery agents can now use data analytics tools to analyze borrower data, including payment history, credit score, and other relevant information. This helps them to identify potential defaulters and take appropriate measures to prevent loan defaults before they occur. For example, if a borrower’s payment history indicates that they are likely to default on their loan, loan recovery agents can intervene early on and provide the necessary support to prevent the borrower from defaulting.
Technology is also helping to improve communication between borrowers and loan recovery agents. The use of mobile technology and messaging applications has made it easier for borrowers to communicate with loan recovery agents. This reduces the chances of misunderstandings or miscommunication between borrowers and loan recovery agents, which can lead to unethical loan recovery practices. Borrowers can now receive reminders and notifications about their loan repayments through messaging applications, reducing the chances of missed payments and subsequent loan defaults.
Another way technology is helping to curb the unethical loan recovery scenario in India is through the use of artificial intelligence (AI) and machine learning (ML) algorithms. These algorithms can analyze large amounts of borrower data to identify patterns and trends, enabling loan recovery agents to make informed decisions about the best course of action to take in each case. AI and ML algorithms can also help to automate the loan recovery process, reducing the need for physical intervention by loan recovery agents.
Finally, technology is also being used to provide financial education and support to borrowers. Many loan recovery agents now provide financial education to borrowers, helping them to manage their finances better and avoid defaulting on their loans. This helps to reduce the number of borrowers who fall into debt and require loan recovery services, ultimately reducing the need for unethical loan recovery practices.
In conclusion, technology is playing a significant role in reducing the unethical loan recovery scenario in India. The use of digital payment systems, big data analytics, mobile technology, AI and ML algorithms, and financial education and support are all helping to create a more transparent and ethical loan recovery process. As technology continues to evolve and improve, it is likely that we will see further advancements in this area, ultimately leading to a more ethical and sustainable lending ecosystem in India.