'The collections industry is running on a dignity deficit'

The rush in retail lending and the associated high stress in loan quality has put the spotlight on debt collections. With the Reserve Bank of India insisting on responsible recovery and customer dignity, an empathetic collections model is taking shape. Ananth Shroff, cofounder and chief executive officer of DPDzero, which uses artificial intelligence (AI) for debt collections, interacted with Raghu Mohan via email. Edited excerpts:

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Why do you think the collections side has to be reimagined?

Retail credit has exploded, tech has scaled while disbursals have got slick, and digital lending has seen a surge of approximately 132 percent (compounded annually) in the last few years. However, collections have stayed where they were — outsourced to agencies and fragmented in approach. The outdated approach of increasing outreach frequency or intensity of communication only reduces the creditor’s ability to contact debtors to resolve delinquencies. It is important to understand the psyche of today’s borrower — they are digital natives, tech savvy, and sensitive to the kind of experience they receive from the lenders when it comes to loan repayments. The answer to resolving collections is not to keep waiting to write off bad debts in due course of time every financial year but to have a change in mindset shift in how collections is perceived, discussed and tackled in the boardrooms. Your future valuation depends on today’s book quality. Your brand reputation gets judged not when you disburse but when you collect.