A colleague forced into hiding or switching jobs because recovery agents turn up at office every day,an IT sector employee taking personal loans to pay back credit card debts,an employer checking the credit card credentials of a prospective hire these are the new debt stories dotting the urban landscape. Now,in the information technology capital of India,where the young begin their careers with fairly handsome salaries,there is a rise in services offering help in tackling retail debt. Bangalore alone has two such companies. Debt Doctor Management Services,one of Indias first financial services companies focused on retail debt that started operations two years ago,now claims a client base of 5,000. Despite the cultural skew against talking about debt,people are walking in,a significant proportion from the IT sector,says Ashwin Cannonkadu,CEO and founder. Budgeting and personal finance is still a trial and error process for most middle class people in India. As soon as a new employee in an IT company gets a bank account,they are bombarded with offers of credit cards and personal loans. Many people take up the offers with no knowledge of the financial implications of an EMI or credit card payments until they are stuck in the cycle of repayments, Cannonkadu says. While people coming to avail services at the 55-man Debt Doctor office in Bangalore cut across age groups and job profiles,there is a predominance of youth and IT/BPO sector employees. Getting people to admit they have a debt problem is often psychological. It is almost like getting someone to admit to alcoholism at an Alcoholics Anonymous meeting, says Cannonkadu,an engineer who switched careers. He cites the example of an employee of a multinational IT company in Bangalore who on a salary of Rs 1.20 lakh per month notched up unsecured debts amounting to Rs 1.2 crore on credit cards and personal loans. He had taken new personal loans and credit cards to pay old ones. Debt Doctors intervenes by linking up with the financial institutions where its customers have run up debts and working out effective repayment methods for a fee of a percentage of the debt. This is where we are able to provide value to financial institutions since we are able to get people in debt to voluntarily come back to them instead of running away from other methods employed by them, says Cannonkadu. Approaching the retail debt problem from the opposite end from the side of the financial institutions is Arms. It is the retail debt recovery division of Arcil,Indias first large-scale asset reconstruction company. The company that has branches all around the country has a stated goal of recovery and resolution of retail loans and receivables management with a humane approach. Arms works by contacting retail debtors on the basis of information provided by financial institutions and then convincing them to address their debt problems. Though there are RBI-issued guidelines for Financial Literacy and Credit Counseling by financial institutions and many banks offer debt counselling services to clients,very often customers in debt are wary of approaching their own lenders for recourse for their debts,explains Cannonkadu.
