Source:IST, Nikhil Menon, ET Bureau 17 Mar 2010, 0156 hrs
Sometime last year, a 34-year-old manager at a multinational
company in Bangalore, was forced to borrow money for his
father’s treatment, which he did with the typical recklessness
of the new-economy consumer. “I already held a few credit cards and had dues on them but was
forced to take more loans. Eventually, I found that my installment
outgo exceeded my monthly salary!” the man who requested not to
be named in this story, recalls. And then began the constant
barrage of calls from collection agents.
“I was getting very upset, because the agents would call me
constantly and stand near my office and residence, waiting for me,”
he says. He tried calling the banks and negotiating with them,
but they were unresponsive. A sympathetic friend then told
him about Debt Doctor, a startup that does debt management
for financially distressed individuals.
“I was hesitant about approaching an outsider with my financial problems,”
he admits, adding, “But once I met the team, I became aware of my options.
The team not only advised me but also negotiated with banks on my behalf.”
Today, he has already paid off two of his six loans.
Two more are in the process of being closed and he is hopeful
that he would be debt-free soon.
This isn’t an uncommon story. The very concept of unsecured loans
has found takers in many Indians, who, like their Western counterparts,
are borrowing large sums of money to live in the present, paying little
heed to the consequences of such a dangerous lifestyle.
Ashwin Cannonkadu, a retail banking professional, who
has spent several years in the financial services industry,
including Merrill Lynch, was determined to do something about this.
Cannonkadu, founder and CEO of Debt Doctor Management Services,
which claims to be India’s first debt management company, says,
“I would often read about suicides due to harassment and
unethical practices followed by recovery agents.”
His team also conducted research into the non-performing
assets of various banks and financial institutions operating in
unsecured debt products (including personal loans, business loans,
consumer loans and credit cards).
“The alarming result was that the default rate was very high,” he says grimly.
Eventually, the central bank stepped in to contain defaults and
provided guidelines to banks to set up credit counselling centres.
This marked the first tentative steps of debt management in India
and Debt Doctor saw an entrepreneurial opportunity here.
The company started in September 2009, but has been
conducting ‘clinics’ or public workshops for some months
prior to that. Currently restricted to Bangalore, these clinics,
promoted through newspaper ads and email/SMS campaigns,
seek to highlight the importance of good financial management
and benefits of maintaining a good credit rating.
Borrowers can approach Debt Doctor for personalised
guidance into managing debt more efficiently through a series
of one-to-one interactions with a panel consisting of
financial experts, legal and psychological experts.
The client are advised on how to manage and consolidate
debt. If the client is unable to close the loan in the near future,
Debt Doctor even negotiates with bank officials for a better deal.
As a service provider, the company’s revenue model consists of
a fixed fee as well as a variable component, charged to the client.
Debt management is still nascent in India.
“Financial Institutions are currently not geared to
cater a third party intervening in the whole process
. Also, a third party is viewed by FIs as a deterrent,
as opposed to the value that they can bring,”
Cannonkadu says. Nevertheless, Debt Doctor
is on a growth path and hopes to expand into Chennai,
Mumbai, Hyderabad, Delhi and Kolkata in the next financial year.
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