collection!policy! - ujjivan sfb&!resolutionmechanism! ... tools!for!recovery! ......

Collection Policy February 2017

Corporate office Address:

Grape Garden, No. 27, 3rd A Cross, 18th Main

Koramangala 6th Block, Bengaluru 560 095

This document is for Internal Uses only and may not be reproduced in any form without the consent of Ujjivan Small Finance Bank Ltd

Confidential


Policy Approval Committee Samit Ghosh Chief Executive Officer & Managing Director Sneh Thakur Head of Credit and Collections -‐ Microfinance Arunava Banerjee Chief Risk Officer Srikumar Vadake Varieth Head of Legal Premkumar G Chief Vigilance Officer Alagarsamy A P Head of Audit Carol Furtado Head of HR & Service Quality Sridhar Mallu Head of Credit -‐ Housing & MSE

Proposed by Sneh Thakur Head of Credit and Collections -‐ Microfinance Sridhar Mallu Head of Credit -‐ Housing & MSE Vijay Kumar National Collections Manager

Effective Date Feb 01, 2017 Approver Board of Directors Approved on Jan 10, 2017

Policy Owner Head of Credit and Collections – Microfinance & Head of Credit -‐ Housing & MSE

Review frequency Annual

Confidential


Contents 1. INTRODUCTION .................................................................................................................................... 7

1.1. Scope Objectives and Principle ..................................................................................................... 7

1.2. Guiding Principles of Collection: Code of Conduct ....................................................................... 8

1.3. Collection Dos and Don’ts .......................................................................................................... 10

1.4. Policy Review & Approval process .............................................................................................. 12

1.5. Collection Organization Hierarchy: Micro Finance GL & IL & Housing &MSE ............................ 12

1.6. Product Segment ........................................................................................................................ 13

2. MICRO FINANCE-‐ GROUP LENDING ................................................................................................... 14

2.1. Identifying Overdue .................................................................................................................... 14

2.2. Broad Default Classification: ...................................................................................................... 14

2.3. Managing Client and Spouse demise cases ................................................................................ 16

2.4. Collection strategy ...................................................................................................................... 18

2.5. Dunning strategy ........................................................................................................................ 19

3. MICRO FINANCE -‐ INDIVIDUAL LENDING .......................................................................................... 19

3.1. Type of defaults: ......................................................................................................................... 20

3.2. Collection strategy: ..................................................................................................................... 22

3.3. Bucket wise collection strategy .................................................................................................. 22

3.4. SMS Strategy .............................................................................................................................. 24

3.5. Calling Strategy ........................................................................................................................... 24

3.6. Field Visit Strategy (> 30 DPD) .................................................................................................... 25


3.8. ECS/ACH Representation ............................................................................................................ 26

3.9. Legal Strategy ............................................................................................................................. 26

4. COLLECTION PROCESS FOR HOUSING & MSE ................................................................................... 26

4.1. Introduction ................................................................................................................................ 26

4.2. Collection Strategy ..................................................................................................................... 27

4.3. Bucket wise collection strategy .................................................................................................. 28

4.4. SMS Strategy .............................................................................................................................. 30

4.5. Calling Strategy ........................................................................................................................... 31

Confidential


4.6. Field Visit Strategy (> 30 DPD) .................................................................................................... 32


4.8. ECS/ACH Representation ............................................................................................................ 32

4.9. LEGAL STRATEGY ........................................................................................................................ 32

4.10. Recovery & Resolution Mechanism ........................................................................................ 34

4.11. Engagement of Recovery Agents ............................................................................................ 34

4.12. Identification of Wilful Defaulters .......................................................................................... 35

4.13. Tools for Recovery .................................................................................................................. 38

4.13.1. Restructuring, Rephasement& Rehabilitation ................................................................ 38

4.13.2. Loan Rescheduling .......................................................................................................... 40

4.13.3. Exit Strategy .................................................................................................................... 42

4.13.4. Settlement/Compromise – For secured & Unsecured IL ................................................ 42

4.13.5. Sell down to Asset Restructuring Company/other entities ............................................ 45

4.13.6. Write off/Waiving of Legal action ................................................................................... 45

4.13.7. Invoking the Provisions of SARFAESI Act ........................................................................ 46

5. LEGAL ACTION & RECOVERY (Procedure) ......................................................................................... 49

5.1. Guidelines on seizure / repossession of assets hypothecated to Ujjivan ................................... 49

5.2. Arbitration proceedings .............................................................................................................. 51

5.3. SEC 138/25 NI ACT ...................................................................................................................... 54

5.4. Demand Promissory Note .......................................................................................................... 57

5.5. LokAdalat .................................................................................................................................... 58

5.6. Debt Recovery Tribunal .............................................................................................................. 59

6. RECOVERY MECHANISMS -‐ Repossessions ....................................................................................... 60

6.1. Giving notice to borrowers ......................................................................................................... 60

6.2. Repossession of Secured assets ................................................................................................. 60

6.3. Valuation & sale of secured assets ............................................................................................. 61

6.4. Opportunity for the borrower to take back the secured assets ................................................. 61

7. SKIP TRACING PROCESS ..................................................................................................................... 62

8. POLICY ON NON-‐STARTERS ............................................................................................................... 63

9. COLLECTION STRATEGIES FOR MASS DEFAULT BRANCHES .............................................................. 67

Confidential


9.1. Identification of mass default cases ........................................................................................... 67

9.2. Strategies for handling mass default cases: ............................................................................... 68

10. REPAYMENT MODE ........................................................................................................................ 69

11. RECEIPT BOOK PROCESS – for field collections ............................................................................. 70

11.1. Indenting, distribution, custody and verification of Receipt Books ........................................ 70

11.2. Record maintenance and audit checks: .................................................................................. 71

11.3. Process for lost receipt book .................................................................................................. 71

12. COLLECTION MANAGEMENT SOFTWARE (IC4) ............................................................................. 71

12.1. Introduction ............................................................................................................................ 71

12.2. IC4 Overview: ......................................................................................................................... 73

12.3. Mobile Module: ...................................................................................................................... 73

12.4. Web module: .......................................................................................................................... 73

12.5. Collection Management Responsibilities: .............................................................................. 73

13. TELE-‐CALLING FOR MICRO FINANCE IL, HOUSING & MSE ............................................................ 75

14. COLLECTIONS CAPACITY PLANNING .............................................................................................. 77

14.1. Collection reviews .................................................................................................................. 78

14.2. Supervisory Review ................................................................................................................ 78

15. COLLECTOR TRAINING ................................................................................................................... 79

16. COLLECTION MIS ............................................................................................................................ 79

17. DAILY COLLECTION REPORT ........................................................................................................... 80

18. LATE PAYMENT CHARGES– ALL PRODUCTS .................................................................................. 80

19. LOAN WRITE OFFs .......................................................................................................................... 80

19.1. Process for Write off (Existing) ............................................................................................... 81

19.2. System write-‐off process using IC4 ......................................................................................... 82

19.3. Write off recovery: ................................................................................................................. 82

19.4. Monitoring Bad debt Recovery ............................................................................................... 83

20. STAFF LOAN RECOVERY ................................................................................................................. 84

20.1. Recovery Process -‐ Pre-‐Staff Loan OD: ................................................................................... 84

20.2. Recovery Process -‐ Post-‐Staff Loan OD: ................................................................................. 85

20.2.1. Steps of Recovery ........................................................................................................... 85

Confidential


20.3. Receivables from Staff ............................................................................................................ 87

21. DOCUMENT PRESERVATION .......................................................................................................... 87

22. PROVISIONING NORMS ................................................................................................................. 88

23. ANNEXURE 1: Abbreviations ......................................................................................................... 89

24. ANNEXURE 2: References to Key RBI Circulars ............................................................................. 90

25. ANNEXURE 3: Notice Formats ....................................................................................................... 91

26. ANNEXURE 4: IC 4 Workflows with OD reasons ......................................................................... 104

Detailed WF.xlsx

...................................................................................................................................... 105

26.1. ANNEXURE 5: IC4 Auto Report formats ................................................................................ 107

Confidential


1. INTRODUCTION The purpose of the collection policy is to create a set of standardized policies and procedures for collection activities. An effective collection policy is essential to keep a strong control on the portfolio of the USFBL and thereby ensuring that the credit expense of the organization is low. It is essential to adopt effective collection strategies that promote on – time repayment as well as manage delinquencies better. The essential component of a sound NPA management system is quick identification of non-‐performing advances, their containment at minimum levels and ensuring that their impingement on financials of Ujjivan are minimum. Thus the Collections Policy of Ujjivan Small Finance Bank Ltd., (hereafter referred as “the USFBL” or “Ujjivan”)shall aim at making the recovery process faster, so that Gross NPA level is maintained within the risk appetite of the USFBL.

1.1. Scope Objectives and Principle The quality and performances of advances have a direct bearing on the profitability of Ujjivan. Despite an efficient credit appraisal, disbursement and monitoring mechanism, problems can still arise due to various factors and Non-‐Performing Asset (NPA) may arise. These factors may be internal or external. ► Policy outlines structured collection mechanism for all recognized critical and stressed

accounts. ► The Loan Review Mechanism to be triggered on detection of early warning signals to ensure

an effective and expeditious response for correction. ► The Policy emphasizes a broad approach, including critical parameters to be taken into

account, towards the collection, recovery and resolution of loans through rehabilitation, compromise settlements etc.

Confidential


► The Policy also proposes an approach for cleansing of NPA portfolio through judicious write-‐offs.

Objectives: ► To minimize delayed payment post due date (or bounce rate of PDC/ECS). ► To ensure lower forward flow from initial bucket (from 0-‐30 DPD to >30 DPD). ► To reduce the impact of provision and losses on different products – secured & unsecured. ► To reschedule customers who have short term genuine repayment inability with the right

intent of payment. ► To educate customers the benefits of prompt repayment and consequences of non-‐payment ► To ensure collection cost is under control ► To provide inputs to credit policy based on collection experience. ► To ensure compliance with regulations and applicable Code of conduct ► To manage collection of penalty fees based on USFBL norm.

1.2. Guiding Principles of Collection: Code of Conduct “The debt collection policy of the USFBL is based on principle of dignity and respect to customers. The USFBL believes in following fair practices with regard to collection of dues and repossession of security thereby fostering customer confidence and long-‐term relationship and thereby ensures that there is no coercive practice followed while collecting the dues.

The repayment schedule for any loan sanctioned by USFBL is fixed taking into account repayment capacity and cash flow pattern of the borrower. The USFBL explains to the customer upfront the method of calculation of interest and how the Equated Monthly Instalments (EMI) or payments through any other mode of repayment are appropriated against interest and principal due from the customers. The USFBL expects the customers to adhere to the repayment schedule agreed to and approach it for assistance and guidance in case of genuine difficulty in meeting repayment obligations.

The USFBL’s Security Repossession Policy aims at recovery of dues in the event of default and is not aimed at whimsical deprivation of the property. The policy recognizes fairness and transparency in repossession, valuation and realization of security. All the practices adopted by the USFBL for follow-‐up and recovery of dues and repossession of security are in consonance with the Law. The security repossession procedure is set in motion only after all attempts by the USFBL to discuss with the borrower the ways and means to overcome the financial hurdles/default in payment have failed. As an exception, it is to be noted that the USFBL has the right to possess

Confidential


the financed asset, as a preventive measure, even in instances where there has been no default but violation of the terms and conditions of the Loan Agreement.

► Ujjivan's recovery procedure shall be based on good manners, impartial treatment and persuasion.

► Ujjivan shall treat its defaulters with respect and dignity. ► All communications to the customer are in writing, by telephone or through personal visit. The

customer is contacted by telephone on the numbers (residence/work place/mobile) provided by him/her in the application form filled in at the time of taking the loan/modified subsequently as intimated to the USFBL. If the customer is not responding/not reachable over telephone or not paying even after telephonic request, the USFBL's representatives make personal visits to the customer's residence/workplace during reasonable hours of the day.

► Ujjivan shall contact people other than the Borrowers only to locate the borrower ► The USFBL staff or any person authorized to represent the USFBL in collection of dues or/and

security repossession identifies himself / herself and displays the Identity card/authority letter issued by the USFBL upon request.

► Representatives of Ujjivan will not harass or abuse borrowers with threats or offensive mannerisms /language at given time

► The USFBL is committed to ensure that all written and verbal communication with its borrowers are in simple business language and the USFBL adopts civil manners for interaction with borrowers

► Ujjivan shall follow only ethical practices and will not resort to unduly coercive tactics in the process for recovering NPAs.

► Normally the USFBL’s representatives will contact the borrower between 0700 hours and 1900 hours, unless the special circumstance of his/her business or occupation requires the USFBL to contact at a different time.

► Tele callers of call-‐centres will ensure simple business language, decorum and persuasion while making follow-‐up calls

► Borrower’s requests to avoid calls at a particular time or at a particular place are honoured as far as possible.

► The USFBL documents the efforts made for the recovery of dues, as far as possible and the copies of communication sent to customers, if any, are kept on record

► All assistance is given to resolve disputes or differences regarding dues in a mutually acceptable and in an orderly manner

► Inappropriate occasions such as bereavement in the family or such other calamitous occasions are avoided for making calls/visits to collect dues

► Up-‐to-‐date details of the recovery agency if engaged by the USFBL are displayed at its website

Confidential


► The USFBL provides the loan account statement to its customers on request basis when changes in period of loan, quantum of EMI etc. take place. Changes in the rate of interest are communicated to the customers as and when they are effected

► The USFBL bears the cost of getting duplicate sale deed in case the original furnished to it is misplaced at its end on account of any eventuality

► Collections team can disclose the loan obligations only to the customer, co-‐borrower or the co-‐guarantor.

► If the customer is not present and only minors/elderly / infirm are present at the time of the visit, the Collections Representative should end the visit with a request that the customer call back. He should not enter the house unless invited. He should not wait for the customer in the customer’s residence unless specifically asked to do so by the customer or family.

► Ujjivan representatives shall not make false, deceptive, or misleading claims for the purpose of collecting repayments. This includes misrepresenting his/ her identity or falsifying facts about debt status or consequences of non-‐repayment or claiming any monetary or non-‐monetary awards post tracing of the customer.

► Ujjivan shall not initiate any legal or recovery measures including repossession of the security without giving due notice to the borrower in writing. Ujjivan shall follow all such procedures as required under law for recovery/repossession of the security.

► Repossession of security is aimed at recovery of dues and not to deprive the borrower of the security. Repossession, valuation and realization of security shall be done in a fair and transparent manner within the purview of RBI’s Guidelines.

► All communication/letters to the customer either through mail or through telegrams shall be handled directly by the USFBL as appropriate. Mail dunning / telegrams/ Posts/ phonograms/SMS etc. shall be in a format approved by Collections Unit of the USFBL.

► Customer’s questions should be answered in full. They should be provided with information requested, given assistance and issues resolved. Accounts with unresolved issues are to be escalated to management.

► Customer or third party requests for supervisor names or requests to speak with supervisor should always be honored.

► Customers may use USFBL’s grievance redressal mechanism/ escalation matrix in case of any concerns or grievances pertaining to collection of dues & recovery

1.3. Collection Dos and Don’ts

DO’S DON’TS

Confidential


! Do dress in formal clothes and carry the company identity card during work hours positively

! Do be punctual and available at Centre Meetings and in the Branch Office

! Visit and analyze the customer situation ! Do talk in a pleasant, polite and non-‐

aggressive manner at all times. Answers should be factual and to the point

! Collection interactions should be based on fair conduct and persuasion

! Present all the information required by the customer in an appropriate manner

! Do answer borrower’s query to the satisfaction of the borrower

! Keep records of interactions with the customer in the IC4

! Do provide a valid receipt for each loan installment payment received (partial or full) and record the payment in the borrower’s loan passbook/loan card immediately after the transaction and educate customers to keep all the receipts for all future references.

! Visit the Customer on Promise to Pay dates given by them on working days only

! Maintain a reasonable distance from the customer

! Contact customer at appropriate hrs. Timings: Earliest-‐ 7.00 AM & 7.00 PM

! Do keep borrower information confidential and use it only for permissible purposes defined by ujjivan

" Do not get personal, tough or aggressive or abusive

" Do not use coercion of any sort to make recovery of payments.

" Do not humiliate borrowers in public places by discussing their loan over dues with third parties/neighbors

" Do not threaten that assets will be seized " Do not pressurize the members & make

unrealistic demands " Do not claim that the personal documents

collected earlier will form part of collateral " Do not force the customers to make payments

by not giving them an alternative option " Do not humiliate the customer, lose temper, get

angry or irritated irrespective of the situation " Tone should not be harsh or loud " Do not have unending center meetings till

payments are made " Do not give false promises to customers like

promising higher loans in case of part payments, providing jobs to family members etc.

" Do not seize customer assets or any personal documents e.g. Voter ID, ration card etc.

" Do not share customer’s information with other member borrowers/customers

" Do not call borrowers at inappropriate times such as bereavements, illness, social occasions such as marriages, births etc.

" Do not visit or call borrowers between 7 pm to 7 am positively

" Do not discriminate on the basis of caste and religion

" Do not go for collections in a group of more than 2 staff members at a time

" Do not visit the customers on weekly or public holidays

Confidential


1.4. Policy Review & Approval process The ownership of this policy shall lie with National Manager Collections and Recovery, Head of Credit – Micro Finance and Head of Credit -‐ Housing & MSE. The Policy would be reviewed and updated at least on an annual basis. However, it may also be reviewed on an ad-‐hoc basis to reflect changes in regulatory guidelines or market specific changes. The reviewed and updated Policy would be submitted to the Credit Risk Management Committee (“CRMC”) for review and sign off. Subsequently the same will be placed to the Risk Management Committee of the Board (“RMCB”)1 for review and approval. The minutes of meeting of the Committee and the Board would be documented. The Credit Risk Management Committee shall be constituted of the following members:

• Chief Executive Officer (CEO) and Managing Director • Chief Risk Officer (CRO) • Head of Credit and Collections – Microfinance • Head of Legal • Head of Audit • Chief Vigilance Officer • Head of Credit -‐ Housing & MSE

1.5. Collection Organization Hierarchy: Micro Finance GL & IL & Housing &MSE

1Refer to the SFB’s Risk Management Governance Policy for further details on the RMCB

Confidential


• Collection structure is common for all business verticals, Collections officers will be allocated separately for secured and unsecured verticals.

1.6. Product Segment

Micro finance Group and Individual lending Housing and MSE

Joint Liability Group (JLG) loans Housing Loans

Individual Business Loans Loan Against Property (LAP)

Individual Livestock Loans Secured Business Loans

Head Credit and Collecdons

Nadonal Manager Collecdon & Recovery

Telecalling Team lead

Telecallers

Regional collecdon Manager

Area Manager -‐ Collecdons

Cluster Manager-‐ Collecdons

Officer-‐ Collecdon

Collecdon Operatons manager

Confidential


Agriculture Loans Enterprise business Loans

Individual Home Improvement Loans (HIL)

Individual Higher Education Loans

2. MICRO FINANCE-‐ GROUP LENDING

CROs are primarily responsible for both sales & collections of JLG loans. They are the 1st point of contact to all group lending borrowers. The supervisory structure from CRM to AM shall get involved in the collection process at various default category stages. Accountability, customer follow ups &co allocation of accounts have been explained in detail in this section.

2.1. Identifying Overdue The action plan for recovering defaults will vary depending on the reasons of default. Hence it is necessary to first identify the default reasons& subsequently develop an action plan for arrear collections.

2.2. Broad Default Classification: 1. Individual defaults 2 . Technical defaults 3. Defaults caused by Fraud and Mass Defaults

Type of Default Action Plan Person Responsible Individual Defaults Temporary repayment problem

1. Late receipt of salary 2. Illness of a family

member 3. Sudden cash needs

Cause shall be investigated and constant follow-‐up with group and Borrower shall be conducted to collect the dues.

CRO and CRM

Long – term repayment problem

1. Death of an earning member

CRO shall investigate the cause and escalate to CRM. CRM shall analyse the situation and keep in constant touch with

CRO and CRM

Confidential


Type of Default Action Plan Person Responsible 2. Loss of job or

Accident leading to permanent disability of an earning member

3. Serious illness of a family member

4. Natural calamity leading to loss of assets

5. Multiple borrowings 6. Major business

downturn including crop loss

the customer until his/her situation improves. And depending on the actual situations also provide an option to reschedule the loan and short term repayment holiday for the set of customers affected by natural calamities

Wilful defaulter CRO and CRM shall follow up with the borrower and group member for collection in accordance with JLG norms. 2

CRO and CRM

Abscond customers Investigation shall be conducted to in accordance with skip tracing process as defined in this policy.

CRO and CRM, Collection team

Technical Defaults Wrong Posting of repayment

Branch shall intimate the operations department to have the issue rectified.

Branch and Operations

Repayment window changes

Branch shall notify SQ, collections team and operations department to ensure loans are booked in the actual window. Rectified loan card shall be handed over to customer and RO copy shall be sent to the regional operations department.

Branch and SQ

Default caused by Fraud and Mass Defaults Default caused by fraud Cases shall be reported

immediately to the RFMC. Investigation and follow through shall be done in accordance with

CRM/ CBH/ RFMC

2As per Group loan Credit Policy

Confidential


Type of Default Action Plan Person Responsible RFMC Process.

Mass default Upon confirmation from Branch supervisor an immediate intimation along with initial observations shall be sent to NCM, RFMC, Head credit Micro Business, Head Vigilance

CRM, CBH & AM, collection team, Vigilance, RFMC

2.3. Managing Client and Spouse demise cases

1. Deceased customer: In the event of customer demise, neither the family nor the group

members should be forced to make repayments. The life insurance company will settle the claim if the insurance is active.

Action Plan: • When a customer expires the CRO must immediately inform the CRM and update IC4.

CRM will inform operations, insurance and the credit department. • CRM will then visit the customer’s house, speak with the nominee clearly explaining the

benefits they will receive from the insurance company and the documents he / she is required to provide.

• Once the death claim documents are received, branches will courier the same to the insurance department.

• Insurance department will submit the death claim documents to the insurance company. • Once the claim amount is received from the insurance company, Nominee has to settle

the loan amount with Ujjivan.

2. Spouse deceased: In the event of spouse death, CRO should not force the customer or the group members to make payments during the period.

Action Plan: • When a customer’s spouse expires the CRO must immediately inform the CRM and update

in IC4. • CRM will then visit the customer’s house, speak with the nominee (customer) clearly

explaining the benefits they will receive from the insurance company and the documents he / she is required to provide.

Confidential


• Once the death claim documents are received, branches will courier the same to the insurance department.

• Insurance department will submit the death claim documents to the insurance company. • Based on the customer preference, Cashier/CCR will choose one of the below options

while marking the case as demise in BR.Net. o Continue repayment as per schedule o Loan closure on insurance claim settlement

• CRM will contact/visit the customer to understand her preference and will obtain a request letter or cheque as the case may be and authorize the entry posted by the Cashier/CCR.

• In few instances spouse may not insured or insured but not eligible for claim due to nature of death, in such cases customer will not be forced to pay the immediate outstanding EMI due for the month. The emi falling due on the subsequent month will be collected as per existing process in center meetings. If problem seems long term/critical we can lookout option of loan rescheduling or repayment holiday for such customer depending on the criticality. Overdue emi will reflect as an overdue till it is not regularized.

If the customer wishes to continue her loan

• CRM should collect a request letter from the customer along with the claim documents

If the customer wishes to settle her loan through insurance settlement

1. Customer will not be forced to pay the immediate outstanding EMI due. The EMI falling due on the subsequent month will be collected at the center meeting as per the existing process. The overdue EMI will reflect as an overdue till the tenure of the loan. However if the customer wishes to clear the previous overdue or close the existing loan, she may do so at her convenience.

2. On intimation from the insurance company, the cheque issued by the customer will be sent for clearing by the insurance team.

3. On realization of the cheque the loan account will be closed. 4. If the cheque is dishonored then the insurance team will intimate the concerned branch

supervisors by email 5. On receipt of intimation the branch team will follow up with the customer for collection of

outstanding loan amount. 6. If the branch team is unable to recover they will input appropriate remarks against the

customer in Indus Collection software (IC4), which will require authorization by the CRM. 7. All cases reported as Intentional defaulters will get allocated to Collections team

automatically on Indus Collections software (IC4).

Confidential


8. Insurance team will store all the dishonored cheques. Collection/Vigilance can request retrieval of cheques for any future reference.

Customers will be eligible for a repeat loan in accordance with the existing credit policy guidelines. It is important to note that the repayment history of the customer’s previous loan (during the demise of the spouse) shall have no bearing on the sanctioning of her new loan, provided pre-‐closure or repayment has happened in accordance with the above defined process.

Nominee recovery allocation to collection team: OD Cases where Insurance is settled to Nominee and crossed 45 days (from the date of Insurance settlement) with >5k OSP amount will be allocated to field collection team on a monthly basis

2.4. Collection strategy

Collection strategy for Ujjivan will be based on days past due &reasons for overdue.

The primary responsibility of overdue collection lies with the branch staff. Cases are co-‐allocated to other functions based on reasons/criticality of each case as authorized by the distribution supervisors: Overdue Bucket

Activity Responsibility Monitoring Account allocation in IC4

Day 1 All overdue accounts appear in IC4

CRO/LO CRM CRO,CRM

1 to 7 days CRM to monitor the collection and visit the customer.

CRO/CRM CRM/CBH CRO, CRM, CBH

Day 8 Nonstarter cases allocated to field credit team

CRO, CRM, Field Credit Officer (FCO)

CRM, Cluster Credit Manager

CRO,CRM , FCO

8 to 30 days

Auto escalation made to next 2 supervisory levels based on reason

CBH/AM AM CRO, CRM, FCO, CBH, AM

> 90 Days with >75% of OSP cases in GL

Allocation to field Collection team

Officer-‐ Collections Micro finance

Area manager-‐Collection

CRO, CRM, field credit team, CBH, AM, Collection team

Legal Legal action initiated Collection RVM CRO, , CRM, , field credit

Confidential


cases case to case basis Manager and Legal manager

team, CBH, AM, Collection team and legal team

• Abscond cases and sub-‐lending/ ghost loans/mass default can be allocated to collections

immediately if authorized by distribution supervisor within 15 days of default in IC4; else auto allocation on Day 15

• All Willful defaulters in group lending will be auto allocated to field collections after 60 days

• Deceased Spouse Insurance Settled cases, If nominee is a willful defaulter, it can be allocated to collections

2.5. Dunning strategy

Letters will be issued to customer from the system for debt collection purpose. Multiple reminder notices can be sent to the customers.

For difficult accounts multiple reminder notices can be sent to the customers as below. The branch team can raise a request in IC4 and regional office will send across the notices to the customer.

Reminder Notice GL First reminder notice 8 to 30 days Second reminder Notice 31 to 60 Days Final reminder notice 61 to 90 days

3. MICRO FINANCE -‐ INDIVIDUAL LENDING

Confidential


LOs are primarily responsible for both sales & collections of unsecured individual loans. The supervisory structure from CRM to AM shall get involved in the collection process at various default category stages. Accountability, customer follow ups & co-‐allocation of accounts have been explained in detail in this section.

3.1. Type of defaults: The action plan for collection will vary depending on the reasons of default. Accordingly, defaults are broadly classified as below:

► Individual defaults ► Technical defaults ► Defaults caused by Fraud and Mass Defaults


1. Late receipt of salary 2. Illness of a family

member 3. Sudden cash needs

Cause shall be investigated and Constant follow-‐up with borrower/co-‐borrower shall be conducted to collect the dues.

LO and CRM


1. Death of an earning member

2. Loss of job or Accident leading to permanent disability of an earning member

3. Serious illness of a family member

4. Natural calamity leading to loss of assets

5. Multiple borrowings 6. Major business

downturn including crop loss, Cattle

LO shall investigate the cause and escalate to CRM. CRM shall analyse the situation and keep in constant touch with the customer until his/her situation improves. And depending on the actual situations also provide an option to reschedule the loan.

LO and CRM

Confidential


death Wilful defaulter LO and CRM shall follow up with

the borrower & co-‐borrower for collections

LO and CRM

Abscond customers Investigation shall be conducted in accordance with skip tracing process as defined in this policy.

LO, CRM, CBH Credit officer &Collection team

Technical Defaults Wrong Posting of repayment

Branch shall intimate the operations department to have the issue rectified.

Branch and Operations

Repayment window changes

Branch shall notify SQ, collections team and operations department to ensure loans are booked in the actual window. Rectified loan card shall be handed over to customer and RO copy shall be sent to the regional operations department.

Branch and SQ

Default caused by Fraud and Mass Defaults Default caused by fraud Cases shall be reported

immediately to the RFMC. Investigation and follow through shall be done in accordance with RFMC Process.

CRM/ CBH/ RFMC

Mass default Upon confirmation from Branch supervisor an immediate intimation along with initial observations shall be sent to NCM, RFMC, Head credit Micro Business, Head Vigilance &Business head

CRM, CBH & AM, collection team, Vigilance, RFMC

Confidential


3.2. Collection strategy: The various collection strategies based on aging and severity of the cases shall be as below:

BUCKET

BACK END FIELD (Involvement based on buckets)

LEGAL SMS TELE-‐

CALLING REMINDER NOTICE LO CBH AM CREDIT

OFFICER COLLECTION OFFICER

COLLECTION MANAGER RBM

1 to 7 Days ! ! !3 ! X X X X X X X 8 to 30 Days ! ! ! ! ! X ! X X X X 31 to 60 Days ! ! ! ! ! ! ! ! ! X X 61 to 90 Days ! ! X ! ! ! X ! ! X X 91 to 180 Days X ! X ! ! ! X ! ! ! ! >180 Days X ! X ! ! ! X ! ! ! !

• Abscond cases and sub-‐lending/ ghost loans/mass default can be allocated to collections immediately if authorized by distribution supervisor within 15 days of default in IC4; else auto allocation on Day 15

• All cases >30days DPD will be allocated to field collections in IC4 • Deceased Spouse Insurance Settled cases, If nominee is a willful defaulter, it can be

allocated to collections

3.3. Bucket wise collection strategy

Bucket Activities Staff Responsible

Bucket 1 (1 to 30)

• Missed payment/Bounce SMS sent from the core system • 1 to 3 days: Loan officer to visit/ call the customer to collect

repayment or obtain PTP and update in collection software. • >3 days: Bounce calling from the Collections tele-‐calling team to

obtain PTP and loan officer to ensure repayment is picked up. In case the customer has not honored the PTP for more than 3 times the account will be escalated to next 2 supervisory levels in distribution.

• In case the customer is temporarily not contactable during 3 consecutive field visits the account shall be allocated to next 2 levels in distribution and subsequently to officer-‐ IL Credit for mandatory field visit.

• Focus is to normalize the account • Based on the request from Distribution in IC4 ECS/Cheque/ACH

representation will be done by collection operation manager in

Tele-‐calling Manager, Collection Operations Manager, Branch Manager, Loan Officer, Credit Officer

3Reminder notices based on request

Confidential


consultation with National manager-‐ collection and recovery. • For 1-‐12 MOB, the credit officer will be assisting the Loan officer

in collection Bucket 2 (31 to 60 DPD)

• Overdue calling (tele-‐calling unit), field visit and overdue EMI and other applicable charges pick-‐up will be done by the collection officer.

• Based on severity of the case Cluster collection manager will also visit the customer

• The prioritization of collection effort will be normalization first & then stabilization.

• If the Cluster collection manager is of the opinion that customer intent is good but ability is impaired and fit case for reschedule, then he will recommend the case to RCM &NCM

• Credit Bureau scrubs shall be used for all cases >30 days. • The collections operation manager will issue overdue payment

reminder notice on the company letterhead (30 DPD Notice)

Tele-‐calling Manager, Collection Operations Manager, Collection Officer, Area Collection Manager

Bucket 3 (61-‐90 DPD)

• Overdue calling (tele-‐calling), field visit and overdue EMI and other applicable charges pick-‐up will be done by the collection officer

• The collection operations manager will issue notice for overdue payment reminder notice on the company letterhead (60 DPD Notice)

• The prioritization of collection effort will be normalization, rollback or stabilization in that order.

• Based on customer risk profile (POS, Vintage), area collection manager will continue visit the customer

• If the area collection manager is of the opinion that customer intent is good but ability is impaired and fit case for reschedule, then he will recommend the case to RCM&NCM

• Credit bureau scrubs shall be continuously used to observe the payment behavior of Overdue clients

Tele-‐calling Manager, Collection Operations Manager, Collection Officer, Area Collection Manager

Bucket 4 onwards (>90 DPD)

• Overdue calling (Tele-‐calling team), field visit and overdue EMI and other applicable charges pick-‐up will be done by the collection officer


• Based on customer risk profile (POS, Vintage), collection manager will continue visit the customer

• Collections Operations Manager will issue loan recall notice (LRN)

Tele-‐calling Manager, Collection Operations Manager, Collection Officer, Area

Confidential


to the customer. • Based on the feedback from the collection manager legal action

(sec 138/25 of Negotiable instrument/Payment act; sec 9 arbitration, will be initiated by legal manager through empaneled advocate. Any deferral of legal action will be approved by NCM

• In some exceptional cases, company will offer/accept settlement to/from the customer as approved by Head of Credit& Collection Micro Finance.

Collection Manager, Legal Team

3.4. SMS Strategy • Reminder SMS will be sent to all customers before the due date from the LMS • ACH/ ECH/ cheque bounce cases will be flagged in LMS by central Ops. And subsequently

SMS will be sent from LMS • Subsequent SMSs to be sent basis increase in DPD bucket using (IC4) • In case of repayment collection done through manual receipts, a SMS confirming the same

will be sent to the customer once the payment is accounted in a customer’s loan account. • In future in case of payment received through the handheld, a system generated SMS shall

be sent acknowledging the receipt of the same.

3.5. Calling Strategy Awareness Calling (Calling Before 1st EMI)

For enhanced customer experience and to ensure minimal operational delinquency towards early tenor of the loans, awareness calling will be done for all customers (based on contactability) post loan disbursement to make them aware of their due EMI amount and the installment date. The benefit of awareness calling is the confirmation of customer contactability at specified contact numbers and pre-‐empting any customer issues that could have led to customer dissonance. This activity will be carried by Service quality tele-‐calling team

Pre-‐Bounce or Reminder Calling

Pre-‐Bounce and Reminder Calling will be done under 2 circumstances by Service quality tele-‐calling team

Confidential


o For first 4 months, all customers will be called and reminded about their impending due date and requesting them to fund their account before the due date. This is to ensure that customer habit of clearing EMI thru their Ujjivan account is established.

o After 4 months, only customers who have missed their repayment previous month, but paid within the end-‐of-‐month, will be called and asking them to fund their account before due date (so that these accounts will not become overdue post EOM) irrespective of ECS/Cheque or cash mode repayments

Bounce Calling

o Bounce calling will be done to customers whose cheque/ECS/ACH has bounced during the month, insisting them to repay the overdue installment with applicable charges by tele-‐calling collection team (4th day)

3.6. Field Visit Strategy (> 30 DPD) • Prior to field visit, collection team to refer tele-‐calling trial recorded in IC4 • The collector shall visit the customer at his /her residence or work place to establish

contact, negotiate and collect the repayment (or take a PTP) • The intensity of the field visit will be based on:

o Bucket status o Principal outstanding o Payment behavior in the past

• All field visit remarks must be updated in the IC4.

3.7. Dunning strategy Reminder notices will be sent to the customer from IC4. Reminder letters for debt collection will serve several purposes

• It is alternate soft collection method reminding them for overdue repayment • Since it is documented, it shall serve as an evidence when legal action is initiated

Different types of notices will be sent to the customer as per the below aging:

Reminder Notice IL First reminder notice 30th Day Second reminder Notice 31 to 60 days

Confidential


Final reminder and recall notice 61 to 90 Days

3.8. ECS/ACH Representation ECS/ACH representation will also be done on recommendation by collection/ distribution team and approved by NCM based on data analysis of past customer repayment behavior.

3.9. Legal Strategy Legal case will be initiated only after 90 DPD (exceptionally before 90 DPD with NCM approval).. Legal action will be in parallel with other collection actions (tele-‐call, field visit, settlement effort, etc)

Different types of legal actions will be initiated as follows -‐

• Arbitration Sec 9 (for all cases except mortgage). • Sec 138/Sec 25 • LokAdalat • Conciliation

4. COLLECTION PROCESS FOR HOUSING & MSE

4.1. Introduction A Loan Officer (LO) shall represent Ujjivan in collection and secured assets repossession. The process would follow the guidelines set out below:

► The customer would be contacted ordinarily at the place of his / her choice and in the absence of any specified place, at the place of his / her residence and if unavailable at his / her residence, at the place of business / occupation.

► Identity and authority of persons authorized to represent ujjivan for follow up and recovery of dues would be made known to the borrowers at the first instance. Ujjivan staff or any person

Confidential


authorized to represent the USFBLL in collection of dues or / and secured assets, repossession will identify himself / herself and display the authority letter issued by the USFBLL upon request.

► The USFBLL would respect privacy of its borrowers.

► The USFBLL is committed to ensure that all written and verbal communication with its borrowers will be in simple business language and USFBL will adopt civil manners for interaction with borrowers.

► Normally Ujjivan's representatives will contact the borrower between 0700 hrs. to 1900 hrs. Unless the special circumstance of his / her business or occupation requires Ujjivan to contact at a different time.

► Borrower's request to avoid calls at a particular time or at a particular place would be honored as far as possible.

► Ujjivan will document the efforts made for the recovery of dues and the copies of communication sent to customers, if any, will be kept on record using IC4.

Inappropriate occasions such as bereavement in the family or such other calamitous occasions and important social functions such as marriages will be avoided for making calls / visits to collect dues.

4.2. Collection Strategy

BUCKET/DPD SMS TELE-‐CALLIN

G LO/RO

CLUSTER SALES

MANAGER

AREA MANAGE

R

RBM

CLUSTER CREDIT MANAGE

R

REGIONAL CREDIT

MANAGER

COLLECTION

OFFICER

CLUSTER COLLECTION MANAGER

COLLECTION

MANAGER

0 to 30 Days ! ! ! ! X X ! X X X X 31 to 60 Days ! ! ! ! ! X ! X ! ! ! 61 to 90 Days ! ! ! ! ! ! ! ! ! ! ! 91 to 180 Days ! ! ! ! ! ! ! ! ! ! ! >180 Days ! ! ! ! ! ! ! ! ! ! !

Note: Field collections will involve for cases after 30 days of delinquency once it is crossed >12 MOB The action plan for collection will vary depending on the reasons of default. Accordingly, defaults are broadly classified as:

# Individual Defaults # Technical Defaults # Defaults caused due to Fraud/Skip

Type of Default Action Plan Person Responsible

Confidential



Cases shall be visited, situation assessed and collection to be made within 30 days.

Loan Officer/Relationship Manager & Program Manager


Process shall vary basis the cause of default.

Technical Defaults Wrong Posting of Account Branch shall intimate the

operations department to have the issue rectified.

Branch& Back end team

Default caused by Fraud/Skip Default caused by fraud Cases shall be investigated

and reported. Collection &Vigilance and RBM/RCM shall initiate action against staff/ customer

CBH/Cluster Credit Manager

Default caused by Skip Case need to be allocated to Field collections & need to trace by using all the available technique/Resources. Sales/collections & Vigilance should jointly work on resolving such cases

CBH & AM, Collection Officers, Collection Manager & Vigilance manager

4.3. Bucket wise collection strategy

Bucket Activities Staff Responsible Bucket 1 (1 to 30 Days)

• Missed payment/Bounce SMS sent from IC4 • 1 to 3 days: Loan officer/relationship office to

visit/ call the customer to obtain PTP/ re-‐payments and update in IC4.

• >3 days: bounce calling from the collections tele-‐calling set-‐up to obtain PTP and relationship officer to ensure re-‐payment is picked. In case the customer has not honored the PTP for more than 3 times the account will be escalated to next 2 supervisory levels in business.

• In case the customer is temporarily not

Tele-‐calling Manager, Collection Operations Manager, CBH, Cluster Credit Manager, Loan Officer, Credit Officer

Confidential


contactable for 3 consecutive field visits the account shall be allocated to next 2 levels in distribution and credit officer for mandatory field visit.

• Focus is to normalize the account, and ensure corrective action for no future delinquency of the case

• Based on the request from distribution in IC4 ECS/Cheque/ACH representation will be done by collection operation manager in consultation with NCM

• For 1-‐12 MOB for IL, the credit officer will be assisting the relationship officer in collection

Bucket 2 (31 to 60 DPD)

• Overdue calling (tele-‐calling unit), field visit and overdue EMI and other applicable charges pick-‐up will be done by the collection officer.

• Based on severity of the case cluster manager -‐collections will also visit the customer

• The prioritization of collection effort will be normalization first & then stabilization.

• If the cluster manager -‐ collections is of the opinion that customer intent is good but ability is impaired and fit case for reschedule, then he will recommend the case to RCM & NCM

• Credit Bureau scrubs shall be used for all cases >30 days.

• The collections operation manager will issue overdue payment reminder notice on the company letterhead (30 DPD Notice)

For <12 Mth MOB Team responsible will be – RBM, RCM, CCM, CBH, LO,CO Tele-‐calling Manager, Collection Operations Manager, Filed collection team will involve after >12 MOB -‐ Collection Officer, Area Collection Manager

Bucket 3 (61-‐90 DPD)

• Overdue calling (tele-‐calling), field visit and overdue EMI and other applicable charges pick-‐up will be done by the collection officer

• The collection operations manager will issue notice for overdue payment on the company letterhead (60 DPD Notice)


• Based on customer risk profile (POS, Vintage), area collection manager will continue visit the

For <12 Mth MOB Team responsible will be – RBM, RCM, CCM, CBH, LO,CO Tele-‐calling Manager, Collection Operations Manager, Filed collection team will involve after >12 MOB Collection Officer, Area Collection Manager

Confidential


customer • If the collection manager is of the opinion that

customer intent is good but ability is impaired and fit case for reschedule/rehabilitation, then he will recommend the case to RCM & NCM

• Credit bureau scrubs shall be continuously used to observe the payment behavior of Overdue clients

• The collections operation manager will send2nd overdue payment reminder notice on the company letterhead

Bucket 4 onwards (>90 DPD)

• Overdue calling (Tele-‐calling team), field visit and overdue EMI and other applicable charges pick-‐up will be done by the collection officer


• Based on customer risk profile (POS, Vintage), collection manager will continue visit the customer

• Collections operations manager will send loan recall notice (LRN) for cases>90 days.

• Based on the feedback from the collection manager legal action (sec 138/25 of Negotiable instrument/Payment) will be executed through our legal team

• For MSE demand promissory Note can be invoked through claiming legal suite on recommendation from collection manager

• Based on the feedback from the collection manager SARFESI for secured loan will be initiated by legal manager through empaneled advocate. Any deferral of legal action will be approved by NCM

• In some exceptional cases, company will offer/accept settlement to/from the customer as approved by Head Secured/MSE business on recommendation from NCMs

For <12 Mth MOB Team responsible will be – RBM, RCM, CCM, CBH, LO,CO Tele-‐calling Manager, Collection Operations Manager, Filed collection team will involve after >12 MOB Collection Officer, Area Collection Manager Filed collection team will involve after >12 MOB Legal Manager

4.4. SMS Strategy

Confidential


• Reminder SMS will be sent to all customers before the due date by the LMS • ACH/ ECH/ cheque bounce cases will be flagged in LMS by central Ops. And subsequently

SMS will be sent from LMS • Subsequent SMSs to be sent basis increase in DPD bucket using (IC4) • In case of repayment collection done through manual receipts, a SMS confirming the same

will be sent to the customer once the payment is accounted in a customer’s loan account. • In future in case of repayment received through the handheld, a system generated SMS

shall be sent acknowledging the receipt of the same.

4.5. Calling Strategy Awareness Calling (Calling Before 1st EMI)

For enhanced customer experience and to ensure minimal operational delinquency towards early tenor of the loans, awareness calling will be done for all customers (based on contactability) post loan disbursement to make them aware of their due EMI amount and the installment date. The benefit of awareness calling is the confirmation of customer contactability at specified contact numbers and pre-‐empting any customer issues that could have led to customer dissonance. This activity will be carried by Service quality tele-‐calling team

Pre-‐Bounce or Reminder Calling

Pre-‐Bounce and Reminder Calling will be done under 2 circumstances by Service quality tele-‐calling team

o For first 4 months, all customers will be called and reminded about their impending due date and requesting them to fund their account before the due date. This is to ensure that customer habit of clearing EMI thru their Ujjivan account is established.

o After 4 months, only customers who have missed their repayment previous month, but paid within the end-‐of-‐month, will be called and asking them to fund their account before due date (so that these accounts will not become overdue post EOM) irrespective of ECS/Cheque or cash mode repayments

Bounce Calling

Confidential


o Bounce calling will be done to customers whose cheque/ECS/ACH has bounced during the month, insisting them to repay the overdue installment with applicable charges by phone USFBL collection team (4th day)

4.6. Field Visit Strategy (> 30 DPD) • Prior to field visit, collection team to refer tele calling trial recorded in IC4 • The collector shall visit the customer at residence or work place to establish contact,

negotiate and collect repayment (or take a PTP) • The intensity of the field visit will be based

o Bucket status o POS Status o Payment behavior in the past

• All field visit remarks must be updated in the IC4.

4.7. Dunning strategy Reminder notices will be sent to the customer from IC4. Reminder notice for debt collection will serve several purposes

• It is alternate soft collection method reminding them for overdue repayment • Since it is documented, it shall serve as an evidence when legal action is initiated

Different types of notices will be sent to the customer as per the below aging:

Reminder Notice SHL & MSE First reminder notice 30th Day Second reminder Notice 31 to 60 days Final reminder and recall notice 61 to 90 Days Sec 138/25 NIA >90 Days SARFESI for SHL >90 Days subsequently

* All the letter/notice formats are enclosed as annexure to this policy

4.8. ECS/ACH Representation ECS/ACH representation will also be done on recommendation by collection/ distribution team and approved by NCM based on data analysis of past customer repayment behavior.

4.9. LEGAL STRATEGY

Confidential


• For certain defaulting accounts, if other collection efforts are not successful or not advisable due to sensitivities of relationship or adverse publicity, the collections manager may initiate legal action though Vigilance/Legal department

• For carrying out legal activity, the collections manager will designate an officer to be in charge of the legal activity.

• For legal action, specific approved lawyers will be identified and empaneled • Legal action may be initiated under Civil/DRT and/or criminal procedure code as

appropriate to the facts of the case. • The collection unit may use the option of sending legal conciliation letters/ Loan recall

notices to specific customers given the stage of delinquency and feedback from Tele-‐calling/ field.

The following legal strategy will be used for customers >=60 DPD -‐ Send notice under Section 138 of Negotiable Instruments Act (Check Bounce) & Execution of Demand Promissory Notes as per NI act. Once declared NPA initiate proceedings DRT / SARFESI However, there may be instances where the unit may not file legal cases under Civil / DRT. These will be

• All cases where account; balance is low. • Where payment has been received in the last three months. • Where there is a settlement / negotiation in progress.

Legal activity will be monitored and reported through monthly reports giving:

• Fresh cases filed in the month • Cases resolved in the month and therefore • Cases in progress

The report will also indicate the amount recovered in the resolutions obtained in the month. The report will be reviewed by the Regional Collections Manager. The legal officer should also review progress of cases by lawyers and by type of cases. In view of the differing court procedures in various locations, it is recommended that procedure details be maintained at each location by the legal cell in-‐charge. Legal action will be initiated under Sec 138, Civil/Criminal procedure codes based on the following parameters viz bucket, principal outstanding, check amounts and collection history. The collections unit may also send Conciliation letters to specific customers who threaten to declare bankruptcy or who, because of a life event (eg: illness/divorce/ loss of job, etc.), no longer

Confidential


have the financial capacity to pay their debts. The collections unit may use Conciliatory proceedings to provide credit counseling to such customers.

4.10. Recovery & Resolution Mechanism Continuous and focused follow up on a daily basis is the underlying principle for good recovery and also for identifying genuine problems of the borrowers so that timely assistance can be extended to correct any temporary mismatch of the cash flow/ review of repayment schedule etc.

► Endeavour should be to prevent the asset from becoming NPA rather than applying remedial measures at post NPA stage.

► Timely restructuring / rehabilitation in deserving cases should be ensured.

► In exceptional cases, USFBL may opt for One Time Settlement where chances of entire recovery are remote / time consuming.

► USFBL may consider Sale of NPA assets to USFBLs/FIs /Asset Reconstruction Companies.

► USFBL will enforce the provisions of identifying and declaring willful defaulters in accordance with RBI guidelines4. General consistency in approach is expected while dealing with willful defaulters.

Approach for recovery should be practical and non-‐prejudiced. Fair treatment and persuasion are the basic principles of recovery mechanism. Enforcement of security be undertaken only where restructure / rehabilitation has failed or impossible

The recovery mechanisms for retail products like LAP, Individual/Personal Loans will be as mentioned in section 4.4 of this policy

The recovery mechanisms for MSEs will include Rectification & Restructuring and in case these options are seen as not feasible, due recovery options will be resorted to as stated in section 4.4 of this policy

4.11. Engagement of Recovery Agents5 When Ujjivan prefers to utilize the services of recovery agents for collection of dues and repossession of securities, Recovery agents will be appointed as per the regulatory guidelines6 issued in this regard in this respect:

4Master Circular on Wilful Defaulters https://www.rbi.org.in/Scripts/BS_ViewMasCirculardetails.aspx?id=9044 5"Agent" in this Policy would include agencies engaged by the SFB and the agents / employees of the concerned agencies.

Confidential


► The name and address of all Recovery Agents on Ujjivan’s approved panel will be placed on their website for information.

► Only recovery agents from the approved panels will be engaged by Ujjivan.

► In case USFBL engages service of such recovery/enforcement/seizure agent for any recovery case, the identity of the agent will be disclosed to the borrower.

► Agents would be provided with an Identity card (from the recovery agent) for proper identification and shall limit his role of recovery of dues specifically entrusted to them. Any action beyond limits of law shall be at Recovery Agents’ sole risk and responsibility.

► The Recovery Agents shall strictly adhere to the USFBL’s Model Code of Conduct for Collection of dues and Repossession of Secured Assets.

► The arrangement of placing Recovery Agents' name on the panel does not amount to any employment and create no obligation of any kind on the USFBL.

► Representatives proposed to be identified as Agent, should have undergone necessary training and obtained the prescribed certificate from IIBF as per RBI guidelines.

► Recovery Agency shall keep all the affairs of entrusted borrowers highly confidential.

► The Agency shall not have any right to sub-delegate or appoint any sub-agent.

4.12. Identification of Wilful Defaulters As per the scheme framed by RBI with effect from 01.04.19997, USFBLs/FIs are required to submit the list of suit filed accounts of willful defaulters of` Rs.25 lac and above as at end of every quarter to Credit Bureaus and/or any other credit information company of which it is a member and the quarterly list of willful defaulters of Rs.25 lac and above where suit has not been filed to RBI. Classification of willful defaulter by Ujjivan for internal purposes: Ujjivan shall classify willful defaulters irrespective of the amount outstanding, for internal purposes. The term "willful default" in accordance with RBI guidelines8 would be deemed to have occurred if any of the following events is noted:

6RBI Circular on Recovery Agents engaged by Banks https://www.rbi.org.in/commonman/English/Scripts/Notification.aspx?Id=347 7 RBI Master Circular on Wilful Defaulter https://www.rbi.org.in/Scripts/BS_ViewMasCirculardetails.aspx?id=9044 8Refer RBI Master Circular on Wilful Defaulter

Confidential


The borrower/unit has defaulted in meeting its payment/repayment obligations to the lender even when it has the capacity to honor the said obligations.

► The borrower/ unit have defaulted in meeting its payment/repayment obligations to the lender and have not utilized the finance from the lender for the specific purposes for which finance was availed of but has diverted the funds for other purposes.

► The unit has defaulted in meeting its payment/repayment obligations to the lender and has siphoned off the funds so that the funds have not been utilized for the specific purpose for which finance was availed of, nor are the funds available with the borrower/unit in the form of other assets.

For the purpose of determining future course of action in an account, the guiding principle will be the intention of the borrowers concerned. Willful defaults broadly cover the following:

► Deliberate non-‐payment of the dues despite adequate cash flow and good net worth;

► Siphoning off of funds to the detriment of the defaulting unit;

► Assets financed either not been purchased or been sold and proceeds have been mis-‐utilized;

► Misrepresentation/falsification of records;

► Disposal/removal of securities without USFBL's knowledge;

► Fraudulent transactions by the borrower.

► Absconding from current residence without giving any prior notice to Ujjivan.

► Involvement in sub lending activity by the borrower.

As and when accounts is classified as NPA or on occurrence of any of the events noted above in an existing NPA account, collection team shall examine whether same is a case of willful default.

Internal Committee for approving list of willful defaulters:

A Sub Committee for ‘ The Risk management committee of the board’, constituting Chief Risk Officer, Head of Credit and Collections – Microfinance, Head of Credit -‐ Housing & MSE and MD & CEO shall be the final authority to approve the list of willful defaulters for POS Rs 0.5 lacs to Rs 25 Lacs.

System tracking:

The complete list of willful defaulters shall be shared with corporate credit team once in a month for updation in internal systems as negative customer.

Classification of accounts as willful defaulter with outstanding balance >Rs 25 Lacs9

9 These guidelines shall be adopted when Ujjivan start lending loans >Rs 25 Lacs

Confidential


As and when any borrower account with an outstanding balance of INR 25 lac and more is classified as NPA or on occurrence of any of the events noted above in an existing NPA account, branch/RO shall examine whether same is a case of willful default in terms of RBI guidelines and in case of willful default, take prompt steps to get the borrower classified as a willful defaulter, as per the procedure laid down hereunder.

1. The proposal for classification of willful defaulters shall be forwarded by branch/regional officer (RO) to Legal Department at Head Office substantiating the reasons and also supported by documentary proof.

2. Branch/Controlling Office should examine and obtain legal opinion as to whether there is prima facie case warranting criminal prosecution under penal law and forward their recommendation to Legal Department at Head Office

3. The matter shall be examined from the legal angle and placed to the Willful Defaulters Identification Committee 10 . The committee will be the Sub Committee of ‘Risk management committee of the board’, constituting Chief Risk Officer, Head of Credit -‐ Housing & MSE and MD& CEO.

4. If in the opinion of the committee, the case is fit for prosecution, sanction shall be accorded for initiating criminal proceedings

5. It should be ensured that penal provisions are used effectively and determinedly but after careful consideration and due caution.

6. The decision taken on classification of willful defaulters should be well documented and supported by requisite evidence. The decision should clearly spell out the reasons for which the borrower has been declared as willful defaulter vis-‐à-‐vis RBI guidelines11.

7. A Show Cause Notice will be issued to the borrower with a call for submissions. Subsequently, an order will be issued recording the fact of willful default as well as reasons for the same.

8. Reporting of willful defaulters to authorities like RBI/ Credit Bureaus etc., shall be done as per the RBI/Credit Bureaus etc., guidelines in this regard.

The system of dissemination of credit information pertaining to willful defaulters was put in place for cautioning USFBL and FIs, so as to ensure that further finance is not made available to them.

Hence, the above scheme is a very important tool which can be effectively used against the willful defaulters of Ujjivan, to persuade them to settle their dues.

10As per RBI Master Circular on Wilful Defaulters RBI/2015-16/100 DBR.No.CID.BC.22/20.16.003/2015-16 dated July 1, 2015, the “Committee will be headed by an Executive Director or equivalent and consisting of two other senior officers of the rank of GM / DGM”. https://www.rbi.org.in/Scripts/BS_ViewMasCirculardetails.aspx?id=9907 11 RBI Master Circular on Wilful Defaulters RBI/2015-16/100 DBR.No.CID.BC.22/20.16.003/2015-16 dated July 1, 2015

Confidential


4.13. Tools for Recovery The repayment record of borrowers shall be monitored both with regard to payment of interest and repayment of principal. Whenever a borrower defaults or is likely to default, rigorous follow-‐up shall be made for the collection of dues / arrears. When default occurs, oral and written communications are to be sent to the borrower to regularize their accounts within a specified period. In case the loan is secured by a guarantee (personal or corporate), steps shall be taken to recover dues from the guarantor.

Ujjivan shall use any of the following broad methods for management of problem accounts:

1. Restructuring, rephasement and rehabilitation 2. Exit strategy 3. Settlement/ Compromise 4. Sell down to Asset Reconstruction Company (ARC) / other entities 5. Write-‐off 6. Legal Action & recovery – Procedure 7. Invoking of the provisions of SARFAESI ACT 2002

Tool MSE Loans Housing Loans

Restructuring, rephasement and rehabilitation

! !

Exit Strategy ! ! Settlement/ Compromise ! ! Sell down to Asset Reconstruction Company/ other entities

! !

Write-‐off ! !

Legal Action and recovery ! !

Invoking the provisions of SARFAESI ACT 2002

! !

4.13.1. Restructuring, Rephasement& Rehabilitation This represents those accounts where the borrower is willing to repay his dues to Ujjivan but does not have the capacity/funds to do so right away. In such cases, the branch should examine the causes of sickness and recommend the course of action. The first focus of NPA management in such cases will be possible up gradation of the loan, by rehabilitation of the borrower’s business.

Confidential


The rehabilitation option will be examined in cases where there is prima facie scope for restoring viability of the business. The action plan will be put in place in such cases where it is possible to bring the unit back into good health by extending minimum additional funds and marginal concessions by which the unit will be able to meet its obligations fully within a maximum period of 5-‐7 years.

The rehabilitation approach will generally be adopted provided Ujjivan is satisfied that:

► Eligibility criteria and regulatory guidelines with respect to restructuring are fulfilled

► The loan has become an NPA due to factors other than lack of integrity on the part of the promoters.

► Genuineness of the obligor and viability of the proposal is established

► There is prima facie case for considering such a proposal.

The following steps can be taken to rehabilitate the unit so that it may gain enough strength to service the borrowings over a period of time:

► Revision of interest and/or re-‐schedulement of installments.

► Making available need based minimum additional funds. Ujjivan will explore taking additional securities for such exposure.

► In cases where the credit requirements of a borrower are being met by a number of institutions under consortium/multiple banking arrangements, Ujjivan shall be in continuous touch with other lenders to the borrower and shall keep a close watch over their contemplated actions.

The Composition of the Committee shall be as under: a) The Regional Business Manager/Regional Credit Manager of the convener USFBL,

shall be the Chairperson of the Committee; b) Cluster Credit Manager of the Micro, Small and Medium Enterprises Credit

Department of the convener USFBL at the regional or zonal office level, shall be the member and convener of the Committee;

c) One independent external expert with expertise in Micro, Small and Medium Enterprises related matters to be nominated by USFBL.

d) One representative from the concerned State Government. Endeavour should be made to bring representative from the respective State Government in the

Confidential


Committee. In case State Government does not nominate any member, then the convening USFBL should proceed to include an independent expert in the Committee, namely a retired executive of another USFBL of the rank of AGM and above.

e) When handling accounts under consortium or MBA, senior representatives of all USFBLs / lenders having exposure to the borrower.

4.13.2. Loan Rescheduling Rescheduling may be of the following types12:

a) Credit Loan Rescheduling The Credit Function shall be entitled to authorize a change in repayment terms and structures of a customer’s loan post thorough assessment of the customer’s inability to repay as per the original terms.

► New rescheduled loan shall be opened by aggregating the sum of principal and all outstanding loans

► The current rate of interest shall be taken into account ► Tenor shall be determined basis the finalized installment amount

b) Procedural Rescheduling by Operations Procedural/ Technical rescheduling by Operations shall include repayment window changes, product type changes and incorrect loan bookings.

c) Repayment Holiday

4.13.2.1. Repayment holiday is a special provision which shall be given to customers who are exposed to economic losses caused by natural or man-‐made disasters; eg: demolition drives from the Govt, flood or fire destructions or sudden strikes or bandhs. As an instant relief measure, customers shall be allowed to skip a maximum of 90 days depending on the extent of distress caused to the customer and the surroundings.Corrective Action Plan for MSEs13

Rectification-‐ This approach will be adopted by Ujjivan after:

► Obtaining a commitment, specifying actions and timelines, from the borrower to regularize the account so that the account comes out of the SMA status or does not slip into the NPA category.

12Further details contained in the Credit Policy Manual of loan products 13 Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises (MSMEs) https://rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=10304 Details of MSME account monitoring and subsequent CAP are covered in the Credit Policy

Confidential


► The commitment should be supported with identifiable cash flows within the required period and without involving any loss or sacrifice on the part of the existing lenders

► The process should ideally be borrower driven but in certain exceptional cases the Committee14 may consider providing need based additional finance intended only for meeting unavoidable increased working capital requirement.

► Such additional finance should be regularized within a maximum period of 6 months

► Repeated rectification with funding within a year, will be treated as restructuring

► No additional finance to be sanctioned where the account has been reported as fraud by any lender

Restructuring-‐ This approach will be adopted by Ujjivan:

► Only if the assets reported belong to the Standard, Special Mention Account or Sub Standard category and the borrower is not a willful defaulter15.However the Committee may review the reasons for classification of the borrower as a willful defaulter and satisfy itself that the borrower is in a position to rectify the willful default. The decision to restructure such cases shall have the approval of the Board, along with the recommendation of the Committee which has classified the borrower as willful defaulter

► If there is commitment from the promoters for extending their personal guarantee along with their net worth statement supported by copies of legal titles to assets

► It should be noted that any deviation from the commitment by the borrowers affecting the security of recoverability of the loan may be treated as a valid factor for initiating recovery process

► Cases of Frauds and Malfeasance will be ineligible for restructuring. However, in cases of fraud / malfeasance where the existing promoters are replaced by new promoters and the borrower is totally delinked from such erstwhile promoters / management, USFBLs and the Committee16 may take a view on restructuring of such accounts based on their viability, without prejudice to the continuance of criminal action against the erstwhile promoters / management. Further, such accounts may also be eligible for asset classification benefits available on refinancing after change in ownership, if such change in ownership is carried out under guidelines

14 Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises (MSMEs) 15 Master Circular on Wilful Defaulters https://www.rbi.org.in/Scripts/BS_ViewMasCirculardetails.aspx?id=9044 16Details of the committee as required by the RBI Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises (MSMEs) are covered in the Credit Policy

Confidential


contained in circular on “Prudential Norms on Change in Ownership of Borrowing Entities (Outside Strategic Debt Restructuring Scheme)”17.

► The restructuring package shall stipulate the timeline during which certain viability milestones such as improvement in certain financial ratios may be achieved.

Recovery:– Once the first two options at (a) and (b) above are seen as not feasible, due recovery process may be resorted to. The Committee may decide the best recovery process to be followed, among the various legal and other recovery options available, with a view to optimizing the efforts and results.

4.13.3. Exit Strategy Ujjivan may consider exit/exposure reduction on accounts gone into recovery or on accounts where the return on capital is not commensurate with their overall strategy. Since an exit strategy results in cessation of the relationship with a customer, approval for the same shall be obtained from an authority one level above branch.

The methods which can be employed by Ujjivan include:

► Freeze the exposure at the existing level after serving due notice

► Impose cut-‐backs on regular credit

► Modify margin requirements to reduce drawing power

► Enhance the security cover by insisting on additional collateral, personal guarantees of promoters etc.

► Opt for settlement of the exposure, if necessary at a discount

► Sell down to Asset Reconstruction Company (ARC) / other entities

4.13.4. Settlement/Compromise – For secured & Unsecured IL Compromise settlement refers to a negotiated settlement where a borrower offers to pay and Ujjivan agrees to accept in full and final settlement of its dues an amount less than the total

17Prudential Norms on Change in Ownership of Borrowing Entities (Outside Strategic Debt Restructuring Scheme) https://rbi.org.in/Scripts/NotificationUser.aspx?Id=10039&Mode=0

Confidential


amount due to Ujjivan under the relative loan contract. This settlement invariably involves a certain sacrifice by way of write off and/or waiver of a portion of its dues on a one-‐time basis. All settlement / compromise decisions would be approved by the following designated approval authorities.

Micro Finance Housing & MSE Head of Credit and Collections -‐ Microfinance Head of Credit -‐ Housing & MSE Head of Microfinance & Branch Banking Head of Housing & MSE

The Policy recognizes that it is not possible to lay down precise guidelines which can be followed uniformly in case of all compromise offers as each offer is unique in the context of circumstances necessitating its consideration as a recovery option. The Policy however, lays down the following principles which are to be kept in view while considering compromise offers

► Ujjivan may take up a compromise settlement /one time Settlement (OTS) proposal for consideration, irrespective of the present stage and status of the recovery proceedings.

► Any compromise will be a negotiated settlement under which Ujjivan will endeavor to recover its dues to the maximum extent possible, with minimum sacrifice. However it is recognized that amicable settlements are possible only in a win-‐win situation and sacrifice is a part of settlement.

► The latest status of the activity of the borrowing entity which seeks a compromise will be taken into reckoning during the course of negotiation.

► As far as possible, an initial down-‐payment should be taken from the borrower as evidence of his intention to pursue the compromise settlement with Ujjivan.

► In case the borrower has other group companies dealing with the USFBL, influence of these companies or the parent company may be used for a better settlement and/or for getting additional security, pending realization of the entire amount of compromise.

► It will be the endeavor of Ujjivan to get the entire compromise amount <<placeholder for time period>>from the date of settlement. In the event of a One Time Settlement, in cases where the borrower is unable to pay the entire lump sum, USFBL shall recover at least 25% of the settlement amount upfront. The balance shall be recovered in installments within a period of

Confidential


one year together with interest at the existing Prime Lending Rate from the date of settlement up to the date of final payment.18

► At the time of One Time Settlement negotiation when OTS amount is proposed to be paid in installments seriousness and preparedness of the borrower to honor OTS commitments shall be looked into.

► In the case of suit filed account if need be and if practical, the terms and conditions of settlement should be finalized and consent decree from the court should be obtained.

► It is recognized that the OTS amount normally will not be less than the realizable value of securities. While considering the realizable value due consideration will be given to various factors like forced sale value, early realization of money, sale ability of the property, type, effort and cost involved & yield in the account.

► Normally no Compromise Settlement will be made with willful defaulters. However, it is recognized that, sometimes business prudence requires compromise settlement in the case of willful defaulters also, which will be considered on a case to case basis.

► In case of non-‐receipt of the committed compromise amount as per the terms of the settlement, the recovery proceedings already initiated before the settlement shall be continued forthwith.

► The Authority who had approved the compromise settlement earlier may consider the modification in the terms of the settlement. However, in case of settlement/compromise approved by the Board, Business Head – Secured and Head – Unsecured Credit will be the permitting authority for such modifications.

► In the case of sacrifice of undebated Interest the same may be calculated at USFBL prevailing Base Rate (Simple) or the contracted rate/interest claim in the plaint/decreed rate (simple) whichever is less.

► In case of compromise settlements if the settlement amount is more than Rs.1 lakh and more than 2 months’ time is given for payment of the same or the balance thereof, the Net Present Value of OTS amount will be calculated taking the prevailing 90days Treasury bill rate as the discounting factor for tangible assets.

► In compromise settlements/write off cases, the amount of sacrifice will be determined with reference to balance/dues as on the ‘settlement date’ which shall be indicated in the compromise settlement/write off proposals.

18Refer RBI Guidelines on One-Time Settlement Scheme for SME Accounts, RBI/2005-06/153 RPCD.PLNFS. BC.No.39 / 06.02.31/ 2005-06 dated September 3, 2005

Confidential


► In case of compromise settlements normally the amount of settlement shall be at least equal to the net balance or 75% of the Forced sale values of the immovable property securities whichever less. Any deviation in this regard shall be with the permission of the next Higher Authority up to the level of CEO.

► Wherever OTS amount is funded by other Banks/Financial Institutions/NBFCs/ARC or any other entities/individuals, Ujjivan may assign the debt/ securities in their favor. In such cases, the guidelines framed for sale of financial assets will not apply.

4.13.5. Sell down to Asset Restructuring Company/other entities In some NPA accounts, recovery proceedings reach a stalemate for various reasons due to which resolution of such NPA gets delayed.

It is also an established practice in Banking Industry to Sell NPAs on portfolio-‐basis/segment-‐wise viz., Retail Credit advances such as: Housing Loans, Vehicle loans etc. Individual accounts under these segments though small in value but very voluminous in nature warranting valuable time of Ujjivan for follow-‐up and recovery.

It is also observed recently that there are situations where majority of the lenders have classified the accounts as NPA with a few lenders classifying the said account as Standard Assets. There are also situation where majority of the lenders have classified financial assets as SMA-‐2 which is reported to Central Repository for Information on Large Credit as per RBI guidelines19 and is expected to become NPA within a short period. In order to reap higher return from ARCs, RBI is encouraging banks to consider sale of such assets at the initial stage and has offered incentive by spreading the losses over a period of two years.

The basic strategy underlying the approach to management of problem accounts is to focus on initiation of appropriate preventive corrective action at the right time. All stressed accounts shall be closely and continuously monitored.

4.13.6. Write off/Waiving of Legal action

If the borrower has no means to pay and USFBL is convinced that the dues are irrecoverable, USFBL shall waive legal action and write off the amount.

19RBIFramework for Revitalising Distressed Assets in the Economy – Guidelines on Joint Lenders’ Forum (JLF) and Corrective Action Plan (CAP) https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=8754&Mode=0

Confidential


Waiver of legal action/write off can be permitted only when the authorized functionary is satisfied that the borrower has no tangible security or any attachable assets, has no adequate income for repayment and no useful purpose will be served by resorting to legal recourse. However initiation of Revenue Recovery measures (wherever applicable) shall be a precondition to waiver of legal action.

For proposals backed by Govt. sponsored schemes, waiver of legal action shall be obtained from one level higher than the sanctioning authority

Write-‐offs for Housing and MSE loans shall be approved by the Head of Credit -‐ Housing & MSE. All cases identified as fraud by Regional Fraud Management Committee with POS >Rs 100000 shall require approval from CEO & MD.

4.13.7. Invoking the Provisions of SARFAESI Act The provisions of “Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (SARFAESI Act)20 are applicable for only secured loans once accounts are classified as NPA, and if invoked promptly and followed up diligently, act as a powerful deterrent to errant borrowers.

The moment a SARFAESI proposal is approved by NCM as recommended by Collection Manager: Authorized Officer (AO) from Legal department shall be identified who should assume ownership of the account. It is the responsibility of the AO to ensure that the time frame for taking the SARFAESI proceedings forward are strictly adhered to.

Steps that shall be followed while invoking the SARFAESI are:

Repossessions for Mortgages Repossession of Mortgages shall come into effect post the customer loan becoming a Non Performing Asset (NPA) on the USFBL’s books i.e. the customer’s loan is 90 days overdue and all efforts to regularize it have failed. Notice A Notice u/s 13(2) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) will be issued to the borrower, co-‐borrower and guarantor, with all the relevant details.

20http://www.drat.tn.nic.in/Docu/Securitisation-Act.pdf

Confidential


Notice send to dead person is bad in law. The AO to ascertain all the details of Co-‐applicant &legal heirs and send the notice to them The Notice will be sent to the mortgaged property address and other addresses provided on the application form. Possession Notice under Sec 13.2 (SARFAESI) The customer will be allowed 60 days post issuance of the notice to regularize the account or come forward to settle the account. Notice under Sec 13.4 (SARFAESI) After expiry of 60 day notice sent under 13.2 (SARFAESI), we may send notice to customer under 13.4 (SARFAESI) demanding peaceful possession of the securities through our authorized officer. This gives ample opportunity to the customer to come forward and pay / settle with the USFBL. The Authorized officer of the USFBL may visit the customer demanding peaceful possession of the property under notice sent 13.4. In case there is no outcome then we need to approach Chief Metropolitan Magistrate / District Magistrate applying for physical possession of the property. The physical possession of the property shall be taken in a peaceful manner as per law. VOLUNTARY SURRENDER OF IMMOVABLE PROPERTY The customer will be requested to sign a surrender letter. The Panchnama will be signed by the authorized officer, two independent witnesses and the customer. An inventory list will be made for all the articles found in the mortgaged property. The customer will also have to give a written declaration that all his valuables like jewellery; cash etc. has been retrieved by him. This also needs to be signed by the authorized officer and two independent witnesses. POSSESSION OF IMMOVABLE PROPERTY

Confidential


Panchanama will be signed by the Authorized Officer of the USFBL and two independent witnesses. In case the borrower refuses to hand over the property then a complaint will be made before the Chief Metropolitan Magistrate/ District Magistrate. The Chief Metropolitan Magistrate/ District Magistrate will appoint an officer for taking the physical possession of the property. Before the physical possession of the property the court order needs to be communicated to the local police asking for assistance. An inventory list will be made for all the articles found in the mortgaged property. The customer will have to give a written declaration that all his valuables like jewelry; cash etc. have been taken by him. AO to ensure that safe custody of movables by him directly or through agents as per rule SALE OF SECURED ASSETS The USFBL shall proceed with the Auction of the attached property post 30 days of taking possession of the property, in the event, that the customer does not come forward and settle the loan. The USFBL shall send the customer a letter intimating him, of the venue of the sale indicating date and time of the Auction / Sale. The USFBL will consider handing over possession of property to the borrower any time after repossession and before concluding sale transaction of the property, provided the USFBL dues are cleared in full. In case of a settlement by the customer, the property documents will be released to the customer within 30 days of the receipt of payment of the total settlement amount. Note: Further as per the direction from Ministry of finance all such auctioning assets should be published in the official website of the government “tender.gov.in” to get wider publicity and with a view of getting better response APPEAL AGAINST THE USFBL’S ATTACHMENT: The SARFAESI act gives the customer the right to appeal against a possession order only in DRT. RECOVERY OF THE BALANCE AMOUNT: The USFBL shall move an application before the Debt Recovery Tribunal for recovery of any balance due on the loan account after adjusting dues from the sale proceeds.

Confidential


REFUND OF BALANCE AMOUNT: Any excess amount obtained after adjusting the dues on the Loan shall be refunded to the borrower within 30 days. PAPER PUBLICATION OF DEFAULTERS USFBL at its discretion may adopt the process of Publishing Details of Defaulters in the Newspapers specifically for Willful Defaulters. Willful defaulters, according to the Reserve Bank of India, are those who do not repay deliberately despite having sufficient funds and a solid net worth. If the borrower does not comply within 15 days USFBL may even publish the photographs of the guarantors. This is a tool for USFBL to recover dues. But this must be used carefully.

Collection Management – Applicabale for all Products

5. LEGAL ACTION & RECOVERY (Procedure) Recovery proceedings would be initiated against the borrower / guarantor wherever exit, restructuring and rehabilitation or settlement / compromise have been exhausted or are not possible. Wherever possible action for enforcement of security under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (“SARFAESI”) Act, 200221 should be taken.

All legal actions / recovery actions shall be approved by the designated approval authorities as per the Delegation of Authority of the USFBL. In cases of willful default, (e.g. diversion and siphoning of funds), fraud and malfeasance on the part of the borrower, legal action may be the first and only option for recovery, as any other option of recovery would not be appropriate.

The following steps can be initiated in respect of such borrowers.

5.1. Guidelines on seizure / repossession of assets hypothecated to Ujjivan All assets hypothecated to Ujjivan may be seized / repossessed subject to the following:

21Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 http://www.drat.tn.nic.in/Docu/Securitisation-Act.pdf

Confidential


• Assets hypothecated to Ujjivan under all NPA borrower accounts may be seized / repossessed provided such seizure / repossession is legally permitted within the state.

• A Notice indicating the proposed action should be served to the borrower giving him minimum 15 days and maximum of 60 days of time to regularize / close the account and only on failure of the borrower to comply, the action should follow.

• Hypothecated assets should be seized after the expiry of the notice period if the account is not closed.

• Within 15 days of taking possession of the assets if the borrower does not come for regularization/closure/settling the dues, valuation of the assets seized shall be obtained through Ujjivan’s approved valuers.

• Arrangement to dispose-‐off the assets seized shall be made within 30 days of taking possession of such assets upon failure of the borrower to clear the dues and getting the assets released.

• Assistance of professional seizing agents may be availed for the purpose of seizure and safe keeping of the assets seized. All such agents will have to be duly approved by the Collection Department before their services are utilized. Any complaint against the seizing agents will be looked into by the collection Department immediately and corrective action including deletion of such seizing agents from the approved list in extreme cases shall be taken.

In addition to the above following actions will also be initiated

• Reporting the borrower/directors as wilful defaulter to RBI after following prescribed procedure.

• Exercise right of general lien and set off, in respect of all accounts of borrower at any of the branches, before initiating legal proceedings but after giving due notice to the concerned.

• The guarantors/Co-‐borrowers may be pressurized to expedite repayment of the dues. Separate meetings with guarantors/Co-‐borrowers can be arranged for this purpose where repercussions of legal actions upon them and need for their exerting pressure upon borrowers for repayment/regularization may be explained at length.

• Initiating criminal action against borrowers wherever it is found that the borrower has been fraudulent in his dealings with Ujjivan and there is a case of misrepresentation and/or diversion, cheating, criminal breach of trust, using forged documents, dishonest or fraudulent removal or concealment of property etc.

• In all cases where legal action in civil courts/DRTs is contemplated the recovery process shall be initiated immediately in case limitation period is expiring or after reaching a conclusion that rehabilitation and other avenues of recovery have been exhausted. In case it is observed that the borrower is trying to dispose-‐off the securities or the value of securities is eroding for

Confidential


some other reasons, to protect Ujjivan’s interest and prevent dilution of securities, suits should be filed against the borrower/Co-‐Borrowers & guarantors forthwith. The USFBL may approach the courts for granting attachment before judgement22 whereby the USFBL shall be able to realise the amount of the decree.

• Simultaneous with filing of suits, efforts would be made, through process of law, for forcing the borrower/guarantor to declare all their assets on oath and towards obtaining the injunction/garnishee against disposal of assets/receivables and for realization of available securities and impounding the passports of the borrower/Co-‐Borrowers/directors/guarantors. Necessary application for this purpose shall be filed with DRT/competent courts. Attempts shall also be made for obtaining interim decrees on the basis of admission of debt at any stage by the borrower.

• Wherever feasible, winding up petition shall be filed against the companies as a measure of recovery of money as well as for exerting pressure upon the defaulting borrowers.

• UUSFBLL may also consider filing of Insolvency Petitions against individual borrower/Co-‐borrowers &guarantor.

► The status of each suit filed account at branches will be reviewed by the Branch Heads at monthly intervals, in consultation with the advocates concerned. Quarterly reports on all such accounts will be submitted to the Head office. For the purpose of close monitoring, branch Heads or their representative will attend Court/DRT proceedings regularly and also maintain close liaison with the advocates, so that the cases may be disposed-‐off expeditiously and unnecessary delays avoided.

5.2. Arbitration proceedings Arbitration is a quick and inexpensive method of redressal of commercial disputes between parties.

Procedure

Steps Description

Initiation of arbitration proceeding

• Arbitration proceedings will be initiated only when an Arbitration agreement is in writing between the parties.

• Once the cases are identified for arbitration proceedings, a demand notice shall be issued to the customer demanding repayment of entire loan outstanding (principal + interest + other charges) within 10 -‐15 days.

• In parallel, USFBL will also choose to issue a notice for inspection of asset (optional).

22Refer Order XXXVIII, Arrest And Attachment Before Judgement, The Code Of Civil Procedure, 1908

Confidential


Appointment of arbitrator

• After expiry of the notice period in the demand notice and provided customer has not complied with the demand notice, the USFBL will invoke the arbitration clause and USFBL will on its own or through its advocate appoints an arbitrator and send a notice to customer stating that a dispute has occurred and the USFBL has appointed an arbitrator to adjudicate upon the disputes and claims between the parties as per agreement. The place for arbitration is also notified as mentioned in the agreement

Arbitration proceeding • Upon appointment, the arbitrator will inform all the parties regarding his appointment and call the parties for a preliminary hearing and after such hearing, will issue necessary instructions to the parties and will fix the hearing for submitting statement of claim and other things.

Filing of statement of claim • The claimant (USFBL) has to file statement of claim before the arbitrator within the period of time agreed upon by the parties or as determined by the arbitrator. The claim shall be supported with agreement copy, copies of notice issued, statement of account etc. The statement of claim shall contain statement of facts supporting the claim, the points at issue and the relief or remedy sought.

Inspection of documents &

customer reply

• The arbitrator at the request of the customer will allow the customer to inspect the documents submitted by the USFBL.

• Post filing of the claim, the customer will state his defense in respect of the statement of claim filed in a written statement with all supporting documents.

Rejoinder by claimant • Post the customer reply to the statement of claim, the USFBL will amend or supplement with a rejoinder to refute the response of the customer.

Framing of issues • The Arbitrator will frame the issues among the parties and ask the parties to file original documents in support of their claim and defense.

Evidence, examination, arguments

and award

• Proceedings will be mainly through written submissions & documents, unless otherwise agreed by both parties or one party has explicitly requested for oral hearing.

• Both the parties, with arbitrator’s permission, will examine the evidence (inspection of documents, goods or other property). Both parties have chance to cross-‐examine the other party and then present their arguments.

• The decision of the Arbitrator / Arbitrator Tribunal is termed as Arbitral Award. After hearing all the parties and going through

Confidential


the evidence placed on record, the arbitrator will pass the award. The arbitrator will send the copies of the award to all the parties. If the said award, after service, remains unchallenged for 90 days, the same will have effect as decree of the court.

• It is permissible for the parties to arrive at a mutual settlement. If parties settle the dispute by mutual agreement, the settlement will be recorded in the form of an Arbitral Award and such Arbitral Award shall have the same force as any other Arbitral Award

• Based on the final Arbitral Award, the parties will file the Award before the Court to initiate execution proceedings i.e. sale of the assets of the Respondent in satisfaction of the claim.

Appeal of the award:

• A three months’ time is provided to the parties to challenge the award of the Arbitrator. In case parties fail to challenge the Arbitral Award within the stipulated time, the Arbitral Award becomes final and binding on the parties

Interim measure by the court • Any time before the arbitration or during the arbitration proceeding or after the award but before enforcement, the USFBL will seek interim relief from the court on the following grounds -‐

• Seeking custody of asset or sale of asset • For appointment of receiver • Seeking injunction to restrict customer to transfer the asset to

third party during arbitration • To seek detention or inspection of property as this is subject

matter under arbitration.

Filing of application under section

9

• The USFBL under section 9 of the arbitration act will have to file an application to seek interim relief for either of the above in the concerned jurisdiction court. The application should be accompanied by the agreement copy, statement of payment, default notices issued and bounced cheque.

• The Application should request appointment of receiver and instruct to take into custody the asset, if necessary with police help. It should also request the court to instruct the customer not to create third party rights till the petition is heard and settled. Additional request will be made to sell the asset by public auction.

• On receiving the petition, the court will ask the financier to serve a notice of the same to the customer. The notice will be hand delivered or sent by registered AD.

• The customer, on receipt of this notice, is supposed to appear in the court and file his reply to the notice. In case, he doesn’t appear and reply to the notice, the court will give ex-‐parte

Confidential


order.

Appointment of receiver and

repossession of asset

• If a prima facie case is made out, the court will also grant ex-‐parte interim injunction. Receiver will be appointed after hearing out both parties by the court. The court will order repossession of asset by the receiver.

• The receiver will take police help and that of the company staff to locate and take the asset into his possession. It should be ensured that Receiver files a report in the court post possession /action taken by him in respect of the asset.

• The Arbitral tribunal will also require a party to provide appropriate security in connection with interim order? under the Act

• In parallel, claim petition should be filed before the arbitrator and proceeding initiated (this is in case sec 9 is invoked prior to arbitration proceeding being launched).

Disposal of asset • In case arbitration is taking a long time or getting prolonged, then the company will request the court for disposal of asset.

• The sale of asset is done by public auction by giving an advertisement in the newspaper. This is carried out by the receiver only. The amount received on sale of asset is deposited in the court.

• For the shortfall amount (if any), arbitration proceedings will continue and court will grant an award at the end of the arbitration process to recover from customer’s other assets.

5.3. SEC 138/25 NI ACT

Criminal proceeding under section 138/Sec 25 of NI act 1881 & 2002& Section 25 in The Payment and

Settlement Systems Act, 2007

A drawer (customer) would have committed an offence under this act which is punishable by law provided a cheque/ECS issued by him to the payee USFBL in discharge of any debt or liability is returned unpaid (bounced) by the drawee (customer USFBL) for insufficient funds in the customer account or the cheque amount exceeds the arrangement the customer has with his bank to honor the cheque. Procedure

Steps Description

Initiation • If the EMI cheques/ECS presented for payment towards loan liability on behalf of the customer returns unpaid from the bank due to insufficient funds or exceeds arrangement, then a cause

Confidential


is created to initiate proceedings under section 138 of NI Act &Section 25 in The Payment and Settlement Systems Act, 2007.

• In case security PDC’s (postdated cheques) have been banked for the loan outstanding amount after the loan recall notice (LRN) has been sent and the cheque returns unpaid from the bank due to insufficient funds or exceeds arrangement, then a cause is created to initiate proceedings under section 138 of NI Act.

Issue of notice • The cheque s that are returned unpaid by the bank with a memo indicating that the cheque s have returned unpaid due to insufficient funds or exceeds arrangement have to be collected & kept in custody for case initiation.

• Copy of the cheque and bank memo have to be handed over to the company lawyer for him to issue notice under section 138 to the drawer (customer) within 30 days of cheque return memo date, demanding payment of the unpaid amount within 15 days of receipt of notice. The notice has to be sent by registered post with acknowledgment due. In case of Partnership Firm, the notice should be sent to the Firm and all the partners. In case of Public Limited / Private Limited Company, the notice should be sent to the Company and all the Directors who are in charge of and are responsible for the conduct of the business of the company.

• In case the customer pays the amount demanded within 15 days of notice receipt, then no further proceeding is required and case is closed.

Filing of case • If the customer does not pay within 15 days of notice receipt, then based on the delivery acknowledgement of notice received by the company, within the next 30 days, a complaint has to be filed in the court by the lawyer. 30 days limit will be counted after expiry of 15 days from the date of receipt of the notice by customer. In case acknowledgement is not received or date not mentioned, then the case will still be filed after 15 days of issuance of notice (assuming that the notice has been delivered) within the next 30 days.

• The documents that are required for complaint filing are original returned cheque s, original bank memo, Original Notice sent along with the postal receipt and acknowledgement received

Confidential


from the customer (where available) and Loan Agreement (however will be filed at subsequent stage)

• The company legal team based on the recent SC judgment & bill passed in parliament will decide the jurisdiction in which the case shall be filed.

Verification of documents • After filing of the case, a date is fixed by the court for verification/sworn statement of the complainant in relation to the complaint. The Power of attorney holder (which is a company official i.e. the Legal manager/officer) gives a statement confirming the facts of the case in court w.r.t case. The key confirmations are existence of debt, cheque returning unpaid due to insufficiency of funds, adequate notice & time given to customer for payment on demand which has not been honoured.

Issuance and service of summons • Post the verification in the court, either on the same day or future date, the court will issue summons to the customer to appear before the court to defend the charges. Summons is issued by the court on payment of processing fee.

• The service of summons is one of the most critical factors for expediting the case. Without summons being served, the next stage will not be moved to, which is the appearance of the accused to admit or deny charges based on which further proceedings or judgement will be delivered

Bailable or non-‐bailable warrant

stage

• Upon serving the summons, the customer is expected to appear before the court either to contest or admit the charges. In case the customer fails to appear in court without proving any reason (ill-‐health or death in family); the court will issue bailable or non-‐bailable warrant against the customer to ensure his presence in the court on the next hearing date. Generally, it will happen that a bailable warrant is issued first and then non-‐bailable warrant is issued in case the customer doesn’t heed the bailable warrant.

• If the Bailable warrant (BW) or non bailable warrant (NBW) is issued by the court, the same has to be served through the concerned police station where the accused customer resides. Again the company official (collection officer) should accompany the policeman at the time of execution of the BW/NBW on the accused customer for effective recovery.

Confidential


Recording of plea • Once the customer is present in the court, the court will record his plea either to admit the offence of dishonor of cheque s or not. In case he denies the charges, the court for evidence by the complainant fixes a date.

Evidence, cross-‐examination &

argument

• On the next hearing date, evidence is led by the complainant by way of affidavit and supporting documents. Once the evidence is lead, the customer gets an opportunity to defend himself. He will choose to cross-‐examine the complainant. Also, he will call on witnesses including the bank to support his argument.

Final order or judgment Post the argument on either side, the judgment is delivered in favor of or against the accused as per law.

5.4. Demand Promissory Note Promissory notes are one part of NEGOTIABLE INSTRUMENT. Section 83 of the BILLS OF EXCHANGE ACT 1882& Governed by section 4 of NI Act 1881 -‐ refers to ‘an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand or at a fixed or determinable future time, a sum certain in money, to or to the order of a specified person or to a bearer.

• Promissory Note executed in one State may be presented in another State in India with the stamp bearing on the promissory note. No additional stamp duty need to be paid

• PN has TIME validity. The Promissory Note is valid for only 3 years from the date of execution

• Upon default by the customer, a formal notice to be send giving 7 days’ time to repay the due

• If the customer doesn’t pay within 7 days of notice receipt, then based on the delivery acknowledgement of notice received by the company, immediately civil suit will be filed in the court by our empaneled advocate

• After filing of the case, a date is fixed by the court for verification/sworn statement of the complainant in relation to the complaint. The Power of attorney holder (which is a company official i.e. the Legal manager/officer) gives a statement confirming the facts of the case in court w.r.t case. The key confirmations are existence of debt, cheque returning unpaid due to insufficiency of funds, adequate notice & time given to customer for payment on demand which has not been honored.

Confidential


• Promissory Note can be executed partially also by writing behind PN about the part payment received, During the legal course customer may agree to make the part payment, the same should be refer to the court of law and PN will be valid for further execution for the balance amt.

• Post the argument on either side, the judgment is delivered in favor of or against the accused as per law

5.5. LokAdalat LokAdalat is a system of alternate dispute resolution. The lokadalat (people’s court) settles dispute through conciliation and compromise. The courts will be presided by sitting judge or by retired judge, social activists, or members of legal profession if so designated by competent court or by state government. However, it does not have jurisdiction on matters related to non-‐compoundable offences. Procedure:-‐

Steps Description

Making an application in case of

existing litigation

Any party to a dispute will, before the dispute is brought before any Court, make an application to the Permanent LokAdalat for the settlement of dispute. It is written statement with all the facts of the case & nature of dispute and is submitted with all necessary proofs. Dates for lokadalat are fixed at locations

Making an application in case of pre

litigation:

Any party, which is aggrieved by some action of non-‐performance of some act as per the agreement, will file necessary application duly signed by the Power of Attorney holder for referring their dispute to a LokAdalat. A single application also will be filed where there are a number. of opposite parties/customers. The application is filed before the District Judge or The Secretary, District Legal Service Authority.

Claim petition and issue of summons Notices are to be prepared by the Counsel on the format prescribed by the authority for all the customers against whom the proceedings are intended. Thereafter all the notices shall be stamped and signed by the concerned officer of the authority. Dispatch of notices to the defaulters is done through speed post, courier, police personnel, and even by

Confidential


hand by the officials of the company. This is to be ensured so that there is a maximum turnout of the defaulting customers. If applicable, Petitions are required to be prepared and to be filed well in advance before the authority.

5.6. Debt Recovery Tribunal The relief from DRT shall be sought in cases where there is a shortfall of greater than Rs.10 lakhs, in recoveries of secured assets even after the disposal of the asset or in unsecured assets with outstanding greater than Rs.10 lakhs, with no immediate remedy visible by pursuing through Sec 138/25 or Arbitration.

Procedure: -‐

• The tribunal consists of one person who is the presiding officer appointed by the government.

• The USFBL will make an application to the tribunal within local limits of jurisdiction where the customer is residing or carrying on business. Other banks may also join the application if it has to recover dues from the same party.

• Tribunal will issue summons to the customer on receipt of application asking him to reply within 30 days as to why relief requested by the bank/institution should not be granted.

• The defendant (customer) will file a written statement within the stipulated time in his defense including making a counter claim.

• The applicant (bank) will have the right to file a written statement in reply to the counter claim of the defendant.

• The Tribunal has the right to pass an interim order (injunction or attachment) ordering the customer not to transfer or dispose off assets without permission of the tribunal. In some cases, it will ask the defendant to furnish some security to satisfy recovery of debt.

• The tribunal after hearing the appeal of defendant and will pass a final order. • The presiding officer will issue a certificate for debt recovery based on the final order to

the tribunal recovery officer. • The aggrieved party will appeal against the DRT order to the debt recovery appellate

tribunal (DRAT) within 45 days of receiving the order. • Appeal to DRAT is allowed only after depositing 50/75% of the dues as decided by the DRT. • On receipt of the order, the recovery officer of the tribunal will recover debt either:-‐

(a) By attaching and sale of the movable or immovable property of the defendant;

(b) By arresting the defendant and his detention in prison;

Confidential


(c) By appointing a receiver for the management of the movable or immovable properties of the defendant

6. RECOVERY MECHANISMS -‐ Repossessions

The guidelines related to the Collection mechanisms for loan products offered by Ujjivan are as stated below:

6.1. Giving notice to borrowers • While written communications, telephonic reminders or visits by Ujjivan's representatives

to the borrowers place or residence will be used as loan follow up measures, Ujjivan shall not initiate any legal or other recovery measures including repossession of the secured assets without giving due notice in writing.

• Any genuine difficulties expressed/ disputes raised by the customer shall be considered by Ujjivan before initiating recovery measures. USFBL shall follow all such procedures as required under law for recovery / repossession of secured assets

6.2. Repossession of Secured assets • Repossession of secured assets is aimed at recovery of dues and not to deprive the

borrower of the secured assets. • The recovery process through repossession of secured assets will involve repossession,

valuation of secured assets and realization of secured assets through appropriate means. • All these would be carried out in a fair and transparent manner. • Repossession will be done only after issuing the notice as detailed above. Due process of

law will be followed while taking repossession of the secured assets. • Ujjivan shall take all reasonable care for ensuring the safety and security of the secured

assets after taking custody, in the ordinary course of the business and relevant cost will be charged to borrower.

Confidential


6.3. Valuation & sale of secured assets • Valuation and sale of secured assets repossessed by Ujjivan shall be carried out as per law

and in a fair and transparent manner. • Ujjivan shall have right to recover from the borrower the balance due if any, after sale of

secured assets. • Excess amount if any, obtained on sale of the secured assets shall be paid to the person

entitled thereto in accordance with his rights and interests, after meeting all the related expenses, provided Ujjivan is not having any other claims against the customer.

• USFBL's right to general lien and its implications shall be made clear to the borrower while executing the loan documents.

• In the case of hypothecated assets after taking possession if no payment is forthcoming, a sale notice of 7 days’ time to respond will be sent to the borrower. Thereafter Ujjivan shall arrange for sale of the hypothecated assets in such manner as deemed fit by Ujjivan.

• In respect of cases under SARFAESI Act as per the provisions of the Act, 30 days’ notice of sale shall be sent. When public auction or by tender is envisaged, the same shall be published in two leading newspapers out of which one is in local vernacular paper.

6.4. Opportunity for the borrower to take back the secured assets • Ujjivan shall resort to repossession of secured assets only for the purpose of realization of

its dues as the last resort and not with intention of depriving the borrower of the secured assets.

• Ujjivan shall be willing to consider handing over possession of secured assets to the borrower after repossession and before concluding sale transaction of the secured assets, provided Ujjivan dues are cleared in full.

• If satisfied with the genuineness of borrower's inability to pay the loan installments as per the schedule, which resulted in the repossession of secured assets, Ujjivan may consider handing over the secured assets after receiving the installments in arrears. However this would be subject to giving an undertaking by the borrower to repay the remaining installments / dues in future and to maintain the loan account as performing asset until closure of the account as per the terms of the loan agreements(s) to the satisfaction of Ujjivan.

• If the amounts are repaid, either as stipulated by Ujjivan or dues settled as agreed to, possession of seized assets shall be handed back to the borrower within 15 working days

Confidential


after date of permission from the competent authority of Ujjivan or Court/DRT concerned if recovery proceedings are filed and pending before such forums.

7. SKIP TRACING PROCESS Customer who are not traceable at her/his residence or place of work and who is not contactable through telephone/mobile.

1. These are customers who have gone away suddenly and secretly without informing anybody. Where no information is available with the neighbors or group members.

2. Business place has been shut down and no information known to the fellow businessmen

3. No prior notice or intimation has been given to us. Customers who not available during the visit/door is locked/not reachable or not receiving calls for 3 consecutive times will be classified as an abscond customer.

Workflow:

Activity Ageing Responsibility Overdue cases identified to be marked as ‘temporarily not contactable’ (TNC) in Indus collections software (IC4)

Day 1-‐3 CRO/LO/RO

Mandatory visit by CRM after 2 consecutive failed attempts by the CRO/LO to contact the customer. Mark as abscond, if that is the case, on IC4; overdue reason has be authorized by the CBH after necessary due diligence and/or discussion

Day 4-‐7 CRM & CBH& Cluster credit manager

Cases authorized by CBH will be automatically allocated to the Collections team

Day 8 CBH and Collection Manager

If the CBH fails to authorize the overdue reason, cases will be auto allocated to collections team on the 15th day

Day 15 Collection Manager Operations

Visit by the Collection officer and confirmation/additional input given to Cluster Collections Manager& Collection Manager

Day 8-‐30

Collection Manager

Non-‐traceable abscond overdue cases will be flagged off in Br.net, interest accrual stopped and will subsequently attract 100% provisioning over 60 days (based on recommendation by the collection manager)

60 days National Collections Manager (NCM)

Confidential


The various steps that will be initiated for skip tracing to locate the new office or residence address

1. Check with existing neighbors and relatives 2. Check with customer’s customer or customer suppliers 3. Check on permanent address, KYC info mentioned in the application form 4. Check with references with whom TVR was done 5. Check with the local gas Collector if gas receipt was provided as address proof 6. Do a Bureau scrub to check if other contact and addresses are available 7. Check with the local post office if the customer has left any forwarding address 8. Check with local school where customers wards were studying 9. Any public utility service & site – electoral rolls, telephone directories, land record portals 10. Last place worked for salaried customer or Co-‐applicant 11. Check with ration depo to see if there are any updated address or recent purchases

Alternate searches

1. In case of self-‐employed professionals or non-‐professional, searches can be made in business information portal, Job portal, Advertisement portal and other social sites.

2. For customers who may have previously downloaded mobile banking application of Ujjivan onto their IOS or Android phones, updated present location of the individual may be available with the Ujjivan in case they have not changed their mobile instrument. Collections team must seek necessary information from IT team in such instances to get the updated co-‐ordinates of such customers.

3. Check with social network sites to see the updated information or check with common friends if any.

4. Check with Job portals if customer has applied for Jobs in any jobsites 5. Check the recent client ATM transactions of Ujjivan accounts to locate the client location.

Upon tracing, the case should be visited by collector in the new address for resolution. The collector can be reallocated if the new address comes under the working area of other branch of Ujjivan.

8. POLICY ON NON-‐STARTERS

Introduction:

Confidential


After our experience of poor customer selection in the last two years in pockets leading to extensive credit write-‐offs, it is necessary to put in place strict disciplines for future customer selection. The ‘Non Starter Loan monitoring and follow through disciplinary process is one such program. A loan which is a ‘non-‐starter’ clearly indicates poor customer selection either through gross negligence or fraud. A non-‐starter is a customer who intentionally fails to repay one or all of the first four installments.

Non-‐starter Definition:

A Non-‐starter is a customer who intentionally fails to repay one or all of the first four installments.

1. One installment means – 1 monthly installment, 2 bi-‐monthly installments, 4 weekly installments

2. Disciplinary actions on Nonstarters for CRO, LO, RO, Sanctioning authority person, House visit and GRT person shall not include:

a. Rescheduled loans b. Death customers & spouse death cases c. Genuine & acceptable reasons as identified during credit investigation (Refer

annexure) Non-‐starter loans under group lending:

Lending Type

Loan Originator

Non-‐starter occurrence**

Actions

Group

CRO

First time − CRO will not qualify for any Performance allowances & other incentives (through the R & R programs)*.

− Warning email from DM with a copy to RHM, RCM

Second time

− Written warning from HR. Acknowledgment of Warning letter shall be filed in the employee personal file

− Staff will not be eligible to take Staff loan until the accounts get regularized

− Staff will not be eligible for annual performance grading of EE and FEE during the FY

Third Time − Termination and Recovery of the loss amount from the employee final settlement shall be conditional^

House visit person

First time − House visit person shall be put under watch list by Credit.

Second time − Warning email from DM with a copy to RHM, RCM − Staff cannot be nominated for GRT authorization (if

applicable) − Staff will not be eligible for annual performance grading

Confidential


of EE and FEE during the FY until regularization of the loan account

Third Time


− Staff will not qualify for any applicable incentives/R& R* − Staff will not be eligible to take Staff loan until the

accounts get regularized. − House visit certification will be retracted if the accounts

are not regularized within 45 days of default. ≥ 4 Non starters

− Termination and Recovery of the loss amount from the employee final settlement shall be conditional^

GRT Person

5 to 8 non starters

− Warning email from DM with a copy to RHM, RCM & COO

− Staff shall not qualify for any applicable incentives/ R& R*

8 to 10 non starters


− Staff will not be eligible to take Staff loan until the accounts get regularized

− Staff will not be eligible for annual performance grading of EE and FEE during the FY

− GRT certification will be retracted until the number of non-‐starters are reduced to below 3

>10 Non starters

− Termination and Recovery of the loss amount from the employee final settlement shall be conditional^

Other Points:

• **Occurrence of non-‐starters is defined as follows: Number of loans in default with first four installments yet to be fully recovered. Eg: Second account appears in non-‐starter when the first non-‐starter is yet to be regularized/is partially collected.

• *Employee will start receiving incentives from the month the accounts get regularized. (previous month incentives shall not be paid out as arrears)

Non-‐starter loan under Secured and unsecured individual lending: Lending Type

Loan Originator Non-‐Starter occurrence**

Actions

Confidential


Individual loans

Loan officer/Relationship officer

First time Warning email from RBM with a copy marked to RHM, RCM. Staff shall not qualify for any applicable incentives/ R& R

Second time Written warning from HR. Acknowledgment of Warning letter shall be filed in the employee personal file Staff will not be eligible to take Staff loan until the accounts get regularized. Staff will not be eligible for annual performance grading of EE and FEE during the FY.

Third Time Termination. Recovery of the loss amount from the employee final settlement shall be conditional^.

Credit Officer Hub/Sanctioning Authority Person

≤3 Non starters Warning email from RBM/ RCM with a copy marked to RHM.

4 to 6 Non starters Written warning from HR. Acknowledgment of Warning letter shall be filed in the employee personal file Staff shall not qualify for any applicable incentives/R&R Staff will not be eligible to take Staff loan until the accounts gets regularized Staff will not be eligible for annual performance grading of EE and FEE during the FY

>6 Non starters Certification shall be withdrawn & employees shall be put on PIP. Recovery of the loss amount from the employee final settlement shall be conditional^.

Action plan:

1. Branches having 5 or more nonstarters should review the customer acquisition quality and DM/RBM/RCM should present an action plan to the Collection management team. Branches with > 5 non-‐starter shall not be eligible for best branch award or any other such awards as and when announced by Ujjivan.

2. All non-‐starter loans shall be investigated by credit within 30 days of default and the findings of the investigation shall be shared with DM, RCM, COO/RBM and Collection team.

3. In some exceptional cases there could be genuine reasons for customers not being able to repay the first four installments. These cases will be investigated by credit & if found genuine no disciplinary action will be taken. Ujjivan is undertaking this to ensure that basic responsibilities to induct good customers are taken care off and credit is extended only to those who are creditworthy.

Confidential


4. Non Starter Report will be produced every month and implementation of the program will be the responsibility of the DM/RBM, Regional HR Manager & the Regional Credit Manager.

5. Non-‐starter status for each region & the action taken should be reviewed during the Regional monthly business reviews.

All individual records of persons originating the loan/conducting house visit and GRT will be tracked in CBS and Credit and HR will be responsible to initiate disciplinary action through HR Regional committee

^Important Note: Any severe negligence (Conditional) leading to loss of reputation or monetary shall be considered for recovery of loss amount from employee FFS.

Recovery of the loss amount from the employee final settlement shall be conditional^.

Genuine reasons of exclusion from the policy on non-‐starter

Medical reasons as verified through medical documents

Financial distress caused by death of earning member, natural calamities or act of nature / accidents caused by fire & any other act that has an impact on livelihood of the customer and business.

Mass default caused by community issues or any other such external factors

Technical reasons such as window changes, wrong product booking

9. COLLECTION STRATEGIES FOR MASS DEFAULT BRANCHES Mass Defaults are cases of defaults encouraged by local stakeholders in society such as religious heads, caste based organizations and local politicians etc. These are often initiated by local ring leaders. They can potentially get together customers not to repay by spreading false rumors regarding the lending institutions and or deliberately instigate customer not to pay on religious, caste or political grounds.

9.1. Identification of mass default cases

Confidential


The branch team should inform the distributions supervisors immediately after the identification of mass defaults in their working areas.

• CRO/LO should update this information in collection software and which will be immediately notified to the Branch manager.

• CRM should visit the area which is possibly affected by mass default and talk to the customers and understand the situation. CRM should update his remarks in IC4 confirming the mass default situation and inform his next 2 level supervisors

• CBH (Cluster Branch Head) and AM of the branch to thoroughly discuss the situation with branch team and authorise the mass default remarks in IC4.

• RBM, RCM, RVM, RRCM Head of Microfinance & Branch Banking and Head of Credit and Collections – Microfinance shall be notified immediately and action will be taken on a case to case basis

9.2. Strategies for handling mass default cases: • Form a branch level committee for handling mass default cases which will be headed by a

supervisory team member. • Committee to identify the most critical areas/ Centres/ groups which are impacted by

repayment issues and identify the CRO/LOs with highest number of default accounts. • Mentor to spend two days in a week in the affected branch and visit the affected areas.

Discuss the strategies with Branch. • Allocate a dedicated collection officer/ Vigilance officer/ Credit officer for handling high

impact areas/LO/CRO • We prefer to send women employees in those affected areas, if required accompanied by

other CRO/LO/ACRM/CRM etc • Based upon criticality, we prefer to discontinue centre meetings and start door step

follow-‐up for all mass default customers.

• Train the branch staff on collection strategies and disciplines to be followed during collections (refer to Guidelines laid down in fair practise code of collection policy)

• CRO/LO/allotted officer to visit all overdue customers of the branch and distribute Ujjivan leaflet (If situation demands) and showcase newspapers cut outs which carries the legitimate information regarding lending institution and negate the false rumours.

• Educate customers on the wrong happenings and guide them suitably on the ways to overcome such situations.

Confidential


• As a fair collection practice, start the day early for collection @7 AM and close by dusk. Any exceptions for collections beyond 7 PM will require approvals from the Area manager.

• Use of coercive collection practices may prove counterproductive; hence PM & AM shall review the quality of staff interactions with default customers and evaluate complaints on forceful collection practices. Branch staff shall follow the guidelines laid down in fair practices code of collections policy.

• CRM/ACRM to assist collections in all critical areas. • Investigate the actual reason for mass default (business slow down, behaviour issues etc.)

and identify customer’s unwillingness/inability to pay. • Seek support from state MFI associations or MFIN wherever necessary. • Ensure collection on Promise to pay dates from customers.

Status of all mass default branches with action plan should be discussed in RLTs. RBM & RCM to present the summary of affected branches to management as part of monthly business presentation.

10. REPAYMENT MODE Modes of repayments:

Customer can opt for any of the following mode of payments.

1. Cash repayment at center meeting 2. Repayment at Branch office 3. Postdated cheque 4. ACH/ECS 5. NEFT/RTGS (In future)

Payment process for cash repayments:

Collector Hands-‐off to Cashier:

• All payments collected by the collectors in a day must be handed over to the cashier on the same day.

• If the overdue is collected within 7 days of due date the relationship officer needs to update the transactions in handheld device.

• All greater than 7 days overdue collection needs to be handed over to Cashier. • All the collection entries posted in the Core system will be supervised by the branch

manager.

Confidential


• At the point of hands off cashier must scrutinize each receipt for correctness of the deposit.

• The Cashier must ensure that the original receipt has been handed over to the customer and all the signatures are present.

• The carbon copies must not be overwritten in ink under any circumstances. Once the cashier is satisfied with the validity of the receipt issued he / she should update the payment in system, with the details of the payment.

• The collector must ensure that receipts are issued serially and there is no break in series. Any such discrepancies must be highlighted to Collector immediately and also to branch manager.

Payment deposit process:

For all the cash payments collected in a day, the collector must deposit the cash with Branch on the same day. All Cheque / DD’s collected by the collector needs to be deposited with the Branch with proper acknowledgement, record of which needs to be filed at the DCA/ IC4

Receipt Audit:

Periodic audit on receipts shall be done by the internal auditors of Ujjivan. Any discrepancies found will be highlighted to the Distribution supervisors/Collection Managers for corrective actions.

11. RECEIPT BOOK PROCESS – for field collections

11.1. Indenting, distribution, custody and verification of Receipt Books Each collector will have a separate receipt book. Supervisors at all levels must ensure that there is no sharing of receipt book. The Receipt Books are given to collections staffs for issuance to customers on collection of overdue amount on field.

RESPONSIBILITY:

Regional/ Collections Manager will be responsible for the indent and record maintenance.

PROCESS FLOW:

1) Collections Manager is responsibility to co-‐ordinate with Admin department for printing and procurement of Receipt Books as per the set format at regular intervals

Confidential


2) Collections Manager will indent receipt books to the Admin Department (Stationery-‐In-‐Charge) as and when required for supply to the collections staffs

3) Numbers of receipt books issued, should be tracked collection officer-‐wise

4) Concerned staff should obtain signature of Cashier/CRM on the book copy of each receipt while handing over cash for the overdue amount collected on the field

5) Concerned staff should send the details of issued receipt numbers as per the format in ANNEXURE I to the respective Regional collections Manger every month

6) The used receipt books should be handed-‐over to Collections Manager at their respective offices for custody and should be made available during audit period

11.2. Record maintenance and audit checks:

1) Collections Manager should maintain a record of issued Receipt Books 2) The details should include, number of books indented, issued, Employee name, Employee

Number, Designation, Receipt Book Number, received date and issued date 3) Vigilance Supervisor should verify the physical copies of receipt books during their branch

visits 4) Audit should verify the physical copies of receipt books once in every quarter at RO.

11.3. Process for lost receipt book For any receipt book lost/stolen reported by the user, a complaint (Diary entry) will be lodged by the Cluster/Collection manager along with Vigilance team with the nearest police station and advertisement issued in local newspaper giving details of the lost receipt book and advising the public not to accept cash from such receipt nos.

12. COLLECTION MANAGEMENT SOFTWARE (IC4)

12.1. Introduction • Indus collection system (IC4) is Ujjivan’s collection management system. The collection

system will have pre-‐configured workflows to manage a variety of collections processes like pre-‐emptive dunning, Tele-‐calling, Field visits, write off, repot viewing etc. In Addition,

Confidential


it will allow users to modify these workflows to suit their business requirements. The workflow can also be done by configuring Rules that can be automatically triggered after certain number of days or performing a specific activity or action-‐result by collector.

• The collection system will have an allocation engine (to define which users will work on what kind of cases’). The list of the allocated cases can be prioritized and pushed for collector follow-‐ups as per the defined sequence

• There will be work-‐list management that caters to the requirement of different lists for both the supervisors as wells as the collectors. These to-‐do lists are required for specific purposes like managing authorizations, escalations & supervisory monitoring

• The collection system will also have an account management facility. This would include single view of customer information, smart search facility using multiple parameters, apply single collection action on multiple cases and account handling of exceptional cases.

• The collection system will help track overall performance of the tele-‐caller and field collectors. Performance tracking would include amongst others efficiency (number of calls / visits made), the effectiveness (% of promises taken, % of promises kept) and the productivity (sum collected, % normalized etc.)

• The system will have the capability that templates can be configured for different purposes like Reminder, Payment received, Legal Action initiation. These templates will be used for customer communication. The communication can be based on customer preference in terms of language, mode of communication (SMS, Email, Letter)

• The system will also have document management module, which allow various collection team to store and manage electronic documents. It facilitates uploading and storage of document for individuals.

• The collection system will have the functionality of registering, tracking and controlling receipt books & receipts. The system will maintain the log of the new receipt books printed as well as the transaction details of receipts issued to the customer. It also will have the ability to mark receipts, as lost or cancelled when receipts are either physically damaged or are cancelled.

Confidential


12.2. IC4 Overview: Accounts will migrate to IC4 on the 1st day of overdue, subsequent to the EOD process.

IC4, as a system has both Mobile and Web Interfaces with field staff using the Mobility platforms and Supervisory/back-‐end teams using the Web Interfaces

12.3. Mobile Module: Mobile module will be used by CRO, LO/RO, CRM and field Collection Officers (CO)

CRO/LO/RO will get to see accounts mapped to them with complete details

Collection Officers will get details of all cases allocated to them centrally

12.4. Web module: Web module will enable all supervisors and collection managers to view collections progress made by each CRO/LO/RO &CO.

12.5. Collection Management Responsibilities: The below section defines the role based collection responsibilities:

Designation Responsibilities

CRO/LO/RO • Should mandatorily log in to the mobile IC4 app at the start of the day

• Fetch current overdue data from menu button after log in • Study the Customer follow up history in the Stat Card prior

visit • Input reasons for Overdue during the visit (Standard reasons

Annexed) • Updated contact number and/or address to be captured in

case of changes • Immediately after the visit, mark complete in the main menu

and synch data • Data synch is mandatory at the end of every business day

CRM/ACRM • CRM can access overdue details on Mobile as well as web • CRM will get an automated email every day morning from IC4

with the following details

Confidential


o Overdue report with all follow-‐up details o CRO wise PTP report -‐ PTPs scheduled for the day and

status of previous day o Ageing report: bucket wise aging of accounts (weekly)

• Supervise account wise actions taken by the CRO o Recommend next level authorization for critical

accounts o Authorize change in overdue reasons, if any, based on

his visit o Review with CROs on auto escalated cases such as,

‘Visit not done’ and ‘PTP not visited’ • Visit all critical cases • In case of CRO leave, temporarily re-‐allocate the cases to

other team members • Initiate Write off process for loans > 180 days

CBH • Supervise and Recommend/Authorize Critical cases after review/visit for further action – Collections and legal actions

• Monitor progress of IC4 Usage and Collections using dash boards & reports

• Update remarks for cases visited by self • Approve Write offs

AM/DM • Monitor collections using IC4 dashboards and reports • Review performance with branch team-‐ ‘Unvisited cases’,

‘Action not taken’ or ‘Poor follow-‐up’ Field credit officer/Credit officer

• Visit Non Starter and Critical cases as assigned and IL Cases <12 MOB

Collection officer • Responsible for collection of GL, IL & Critical cases as per allocations made on Indus by the Collections Manager

Cluster/collection manager

• Ensure monthly allocation of accounts to Collection Officers, monitor efficiency and co-‐ordinate with the legal team for legal cases

Tele-‐calling Team • Call CRMs and CROs for cases not updated in IC4 • Call Individual Lending Customers >7 days and input remarks

in IC4 • Resolve technical overdue, if any, as reported by the branch

team in IC4 • Collection reminder notices to GL & IL OD clients through IC4

as requested by the Branch. Pop ups will appear as per the matrix shown in product wise work flow

Confidential


13. TELE-‐CALLING FOR MICRO FINANCE IL, HOUSING & MSE

• Tele-‐calling will be based on auto allocation of cases from core system to COLLECTION SYSTEM IC4.

• Each Tele-‐caller will be assigned one or more work lists. Prioritization of work lists for auto

pop-‐up will be done by the Tele-‐calling Team lead/Asst. Manager in consultation with the Regional Collections Manager for each region.

• Prioritization conditions in the order for action of these work lists will be

# Delinquency/bucket # Principal outstanding # Loan status (Mature/Non mature) # Point in time of the cycle (calling schedule requirement)

• Unapplied payment and cheque bounce information will be taken into account before

making a collection call.

• Calling schedule: During a monthly collection cycle, Tele-‐calling will be carried out in the following broad Phases

DAY OF MONTH TELE-‐CALLING PHASE

1st to 5th Special calling of previous month cases.

5th to 20th First Bounce Calling

20th to 30th Normal Calling based on allocation.

• Prioritization of pop-‐ups during Tele-‐calling will vary with the requirement of the Tele-‐calling phases. During the normal Tele-‐calling period, the aim will be to maximize coverage/contacts, elicit Post Pones and follow-‐up on accounts requiring call back. The priority of pop-‐ups during the period will be:

Confidential


# cases with no follow-‐up # cases with PTPs for the next day s # cases to be called back that day # cases with no contact # cases with PTP but not contacted by field team # others

• Pop-‐up priority for first bounce calling will be for cases that move to 4th day during the

month system run. Balance priority will be as per the normal calling phase. • Trails will be updated on-‐line by the Tele-‐callers for cases allocated to them on daily basis

in IC4. • Any supervisory review cases will be auctioned within two working days by supervisor. • Daily collector-‐level Tele-‐calling productivity MIS will be obtained from IC4 along with the

bucket-‐wise flows MIS. These will be consolidated and compiled every month for review by the Collection Manager along with tele-‐calling unit head

• Collections team to ensure that all Tele-‐callers have an easy access to all the relevant policies and procedures, in order to enhance knowledge/skills which will help improve collections.

• Tele-‐calling schedule to be modified by the Tele-‐calling team lead/asst. manager based on capacity and situational constraints, also needs to ensure that the Tele-‐calling team is adequately capacitated.

• The ACR (Account-‐to-‐Collector-‐Ratio) of each Tele-‐caller needs to be monitored and load balancing needs to be done across the unit.

• Tele-‐calling team lead/asst. manager of each collection unit must monitor the calls of each

Tele-‐caller (twice a month). For new employees and those with performance issues the monitoring needs to be more frequent. Feedback needs to be given to each Tele-‐caller in order to enhance his/her effectiveness.

• The Tele-‐calling team lead/asst. manager needs to review all productivity indicators (Calls per day, success calls, PTP generated, PTP conversion rate, accounts resolved) for each Tele-‐caller at least once a week. For employees who are new and for those with performance issues, this review needs to be conducted more frequently and counselling and remedial training must be provided if necessary.

• The Collections Manager, may also, from time to time, decide to run contests / motivational programs to enhance collection effectiveness. A Performance-‐ Incentive-‐Program is part of the affiliate compensation structure for Tele-‐callers.

Confidential


• In the event of customer raising complaint about calling for any reason, this will be handled by Team lead as a first level and Asst. Manager second level and escalation will move on till tele-‐calling unit head/NCM depending on severity of the complaint and resolutions

14. COLLECTIONS CAPACITY PLANNING

It is the responsibility of National Collection Manager along with the Strategy team to have a comprehensive plan for people management. The plan must include:

# Formalized capacity planning process tied to hiring plans # Recruitment strategy including Job descriptions for various profiles # Performance improvement plans and monthly goals # Process to manage attrition and successor planning # Compensation/ Incentive plans at all levels

National Collection Manager should take a clear line of sight on loan volume forecasting for the next 3 months from strategy team, basis which hiring plans need to be recommended to respective Credit Heads for approval. The forecasting should consider the following parameters:

# Business portfolio performance and growth forecasts # Target Staffing (Accounts to Collector Ratios –ACR) driven by strategy,

management span of control, and intensity levels Guidelines on ACR (with a +/-‐ 10% tolerance levels) are as follows,

Activity Role Bucket Staffing

Tele-‐calling(call-‐centre)

Tele-‐caller Fresh bounce & All DPD cases

1 caller for 450 cases (80 calls a day * 25 days * 80% RPC/4 (avg. intensity per accounts).

Tele-‐calling(call-‐centre)

Team Leader Fresh bounce & All DPD cases

1 team leader for 10 agents

Field collection Officers– Collections >30 Days DPD 1 CO for 70 accounts

Field collection Cluster Manager – Collections

All Buckets 1 CCM for 6-‐7 CO

Field collections Area Manager-‐ Collections

All Buckets 1 ACM for 6 – 7 CCM

Field collections Regional Manager All Buckets 1 RCM for every region

Confidential


Collections

14.1. Collection reviews

Reviewer Reviewee Scope Timeline

Tele-‐calling Manager • Team leader • Tele-‐caller

• Allocation • Productivity&

Performance • Staffing

• Daily • Weekly(or milestone)

• Monthly

Cluster Manager -‐ Collections

Officers – Collections • Allocation • Productivity &

Performance • Staffing

• Monthly • Daily & Weekly(or

milestone) • Monthly

Area Manager -‐Collection Manager

Cluster Manager – Collections

• Allocation • Productivity • Performance • Staffing

• Daily • Weekly(or milestone)

• Monthly

Regional/State Manager -‐ Collection

Area Manager – Collections

• Overall performance

• Exception cases

• Daily & Weekly(or milestone)

• Monthly

National Manager – Collections & Recovery

Regional/Area Manager – Collections

• Overall Performance

• Exception cases

• Daily & Weekly(or milestone)

• Monthly

National Manager – Collections & Recovery

Collection Operations Manager

• Collection System • Collection MIS • Collection

Operations

• Weekly • Monthly • Weekly

National Collection Along with RVM & Vigilance Head

Regional Legal Manager

• Case filing status • Filed case update

• Monthly

Regional Legal Manager

Empanelled lawyer • Case filing status • Filed case update

• Weekly • Monthly

14.2. Supervisory Review

Confidential


The objective of such action is to review accounts that have been escalated to the supervisor or for ascertaining the adequacy of follow-‐up in IC4. The following types of accounts will be reviewed by the supervisor:-‐

$ Accounts with no dispositions $ Accounts with no contacts after repeated follow-‐ups $ Accounts with no promises after repeated contacts $ Accounts have promises have been broken repeatedly $ Accounts which is declared as Abscond, Mass defaults, Sub-‐lending, Disputes $ Exception/Sensitive accounts

15. COLLECTOR TRAINING

• The concerned collection manager will be responsible for the training of collector • Every collector who joins must undergo training on product, process, communication and

negotiation skills and code of conduct as per Induction process. • As part of induction, new collector must also be sent on joint visits with senior collector

prior to doing independent skills. • No collector should go to field without completion of training. Each collector has to be

trained and signed off the training record before going on filed with receipt book. • Collection Manager to ensure completion of DRA Certification Training for collectors

16. COLLECTION MIS

To track the effectiveness of collection activity, following MIS shall be generated, circulated and tracked. The following reports will be required for monitoring (capturing both units and POS) for each product separately and consolidated • % paid on or before due date (for cash payment customer) /On time repayment rate • Cheque bounce report (where PDC/ECS is used) • Bucket wise collection efficiency (bucket 0, 1-‐30 DPD, 31-‐60 DPD, 61-‐90 DPD, > 90 DPD, >

180 DPD, > 365 DPD)

Confidential


• 1+, 30+, 90+ DPD delinquency (coincidental and lag) • Bucket wise Flow rates (net flow, RF, RB, Stabilized, Normalized) • Vintage delinquency • Asset held for sale (SBL/LAP) • Legal – by type of cases & stages • Productivity MIS (Collection efficiency by field collector, collection officer, Product wise

collection efficiency, tele caller productivity report) • Any other collection MIS required by business or Credit • Non-‐starter Report • Product wise delinquency • PTP due repot and PTP status report • Collection log in & activity report

All the predefined MIS is been in built in IC4, which can be viewed in WEB application of IC4 The above MIS should be tracked at branch, regional and national level. All MIS should have trend analysis for 3-‐6 months both on units and basis amount

17. DAILY COLLECTION REPORT DCR will be monitored through collection management system IC4, all the trials with OD reasons and visit details will be captured in IC4 and daily automated reports are triggered to the supervisors for better control

18. LATE PAYMENT CHARGES– ALL PRODUCTS For all Secured, MSE and unsecured individual loans, late repayment charges applicable shall be as per the respective Product Policy programs.

Any exception approval on charges waive off shall require approvals from Credit Policy committee.

19. LOAN WRITE OFFs

Confidential


When all avenues of recovery of overdue accounts have been exhausted and further recovery efforts are deemed futile, a recommendation can be made by branch head to RCM for loan write off. Upon confirmation from Credit, write off process can be initiated & the write off memo shall be updated with remarks based on visits made by all parties. The write off memo shall be signed off by Distribution supervisors, RCM /RBM, Head of Microfinance & Branch Banking and Head of Credit and Collections – Microfinance for Microfinance GL and IL loans.

Head of Credit and Collections – Microfinance shall be the final approval authority for writing off all loans in Microfinance GL & IL. However cases identified as Fraud by regional fraud management committee with POS greater than Rs 1 lacs requires final approval from CEO & MD.

19.1. Process for Write off (Existing) Step 1: Area manager to recommend loan write off

• Cases that exceed > 180 days can be recommended for Write off • Death (Not claimable)/Suicide can be written off before 180 days

Step 2: Field credit officer to visit customers and submit a recommendation to the Credit Manager Step 3: Based on the FCO recommendation, Credit to send the final list of write of cases to the branch. Step 4: CRM, FCO, CBH/AM/DM to visit customer and complete “write off Memo.” Following documents to be verified and copies submitted to RO along with form:

• Death: Verify with group members / relatives / neighbors. Collect death certificate • Over indebtedness: Copy of Loan Cards of all live loans • Daily Collections Report: Attaching a copy of the DCR with the form is mandatory (Not

required if the trials are available in IC4) Step 5: Regional Credit Department to verify documents Step 6: RBM to verify documents and sign off the form Step 7: RCM will then verify all the recommendations and take a decision & sign off. It is then sent to the Business Heads and Head of Credit and Collections – Microfinance. Step 8: Head of Credit and Collections – Microfinance has the ultimate Authority to take final call on write off loans. Credit will pass on the write-‐ off memos to Operations and ensure appropriate entries are passed in the respective General Ledger to close the customer’s account. Backend process for write offs:

Confidential


Upon receiving the forms from credit, Regional operations team will pass the write off entries in system which will work on a maker checker concept. The forms will be finally get sign off from regional operations manager post write off entries in system

19.2. System write-‐off process using IC4 IC4 will have module for initiating write off in system. Following are the process for doing system write-‐offs.

1. CRM/ Branch head to initiate the write off for >180 days cases. Write off process can be initiated before 180 days under special circumstances.

2. Initiation request from CRM/ Branch head shall be authorised by next 2 level supervisors in distribution.

3. Authorised write off requests will appear to area collection manager who will assign the cases to final visit from a collection officer.

4. Collection officer to visit the case and provide his remarks 5. Area collection manager to review the write off request and approve the case for next

level approval. 6. The write off request to go through the following approval authorities

a. RBM b. RCM c. NCM d. Business Head e. Head credit.

7. Final approvals: Head credit will be the final authority in approving all write off requests. Post Head credit approvals a write off trigger will be send from IC4 to core system.

8. Operations team to pass the write off entries in system as per the write off trigger received in core system

19.3. Write off recovery: Once the account is classified as irrecoverable and has been written off from the books of accounts, an MIS of the same shall be maintained at credit and shared with branches, consisting the amount written off and the loan originator details of written off accounts from inception to date. This information will be sent to the branches with a copy marked to distribution supervisor & DM. This exercise will be carried out for all write off cases except for write offs on accounts of staff fraud.

Confidential


Branch should make all efforts to collect the amount due from default customer. If they feel they need assistance from the loan originated staff, the same can be taken if appropriate. If the branch believes that customer is making repayments to some other MFIs those customers can be referred to credit dept. to see the current status of the customer in Credit bureau and based on the bureau details collection efforts should be initiated.

Post recovery of written off accounts, entries are passed in the system using “Write off recovery module” which is available in the software. The current system allows passing the entries of written off account post recovery to the written off Loan ID only thereby eliminating the earlier procedure of posting entries to the GL account.

Write off process in the software:

When a bad debt is recovered post write off, the write off recovery module of Br.Net shall be used to pass customer specific entries.

• Loans write offs are done through module Loan write off in the software post August, 2012.

• Reasons for write offs should be selected from the drop down available in the module. • Select “Is recoverable” screen in the module if the due is recoverable post write offs. • Only the OSP amount will be written off.

Write off Recovery module:

Loans which are recovered post write off post, recovery amount will be posted in the module “Write off recovery” account ID wise(Only for loans which are written off post August 2012 through Loan write off module) eliminating the earlier procedure where the postings were done through GL account.

Procedure is listed below:

• Select Loan ID • System automatically shows recovery ID and the General recovery ledger which is linked

to the product • Add the recovery amount in the software and update the transaction. • Once the transaction is posted successfully, the screen shows the total recovery amount

and the last recovery date.

19.4. Monitoring Bad debt Recovery

Confidential


To mitigate the possibilities of staff misappropriation of recovered amount from a default customer, a random verification for 20% of write off accounts must be done by credit and vigilance on a quarterly basis. MIS team to share write off recovery report with credit & this tracker shall be shared with distribution, credit, vigilance and audit on a monthly basis.

20. STAFF LOAN RECOVERY

Introduction

With the increasing numbers of staff loan ODs, the present recovery process will be followed for effective supervision and control of staff loan ODs. Objective: The basic objective of the process is to establish practical guidelines to be followed by the related parties/ relevant departments in the event of reporting of staff loan OD. The revised process also aims at originating preventive steps by the company before the actual OD is reported in the books. Responsibility: The primary responsibility in recovering the over dues lies with the Regional HR Department. However, the Regional HR Department will work closely with the Regional Collections & Vigilance Department for cases beyond 60 days for initiating Legal actionable and closure thereof. Classification of Staff Loan ODs: Staff Loan ODs generally arises on account of any of the following reasons and can be broadly classified as Pre and Post staff Loan ODs: 1. Employee Resignation 2. Female Employee on Maternity Leave 3. Employee Death 4. Employee Termination/ Employee abscond/Employee Fraud/willful default by Employee

20.1. Recovery Process -‐ Pre-‐Staff Loan OD: I. In order to prevent arising of Staff Loan ODs at the initial stage, Regional HR Payroll Officer

Confidential


should circulate the list of resigned/salary hold employees having outstanding staff loan dues to the Regional HR and Collection manager by 5th of every month.

II. Upon receiving the list, collection team should contact and intimate the concerned

employee to settle the outstanding loan amount before the actual OD is reported in the books.

20.2. Recovery Process -‐ Post-‐Staff Loan OD:

# ODs arising out of Employee Resignation: All Over-‐dues arising out of Employee Resignation should be adjusted from the Full and Final Settlement amount of the Employee. The immediate supervisor of the resigned employee should cross check with the HR payroll officer for any staff loan dues from the employee. If the amount recoverable is higher than the F &F amount, the employee should be asked to clear the dues before processing the F&F amount. Until clearance of the outstanding loan amount, relieving/experience letter should not be issued to the concerned employee.

# Female Employee on Maternity Leave: If the employee who has availed staff loan is going on a maternity leave, it is the responsibility of supervisor to intimate the respective Payroll Officer, Regional HR Manager & Regional collection manager before the start date of maternity leave of the particular employee. Payroll officer upon intimation should reschedule the Staff loan EMI of the particular employee for 3 months and intimate the respective supervisor, RHR Manager and Regional collection manager.

# Employee Death: In case of Employee death, the immediate supervisor of the deceased employee should cross check with the respective HR payroll officer for any staff loan dues. In case of any dues found, supervisor should intimate the respective HR payroll officer to adjust the outstanding loan amount from the Employee’s FFS or collect o/s amount from the nominee while giving the Insurance cheque.

# Employee Termination/ Employee abscond/Employee Fraud/willful default by Employee:

20.2.1. Steps of Recovery

# Recall/ Company Notice • HR Team shall send Recall cum Company recovery notice to the employee

Confidential


immediately after the default for repaying the outstanding loan amount.

• In case the employee do not repay the amount within the given timeline, one more notice should be sent to the employee within a gap of 15 days from the date of first notice sent. The 2nd Notice sent should state that incase of non-‐repayment within the given timeline; company will be forced to initiate legal action.

• HR Team shall also mark the letter to the Local Branch (Base Branch of the

Defaulted Staff to follow up) for employees in distribution department. # Adjustment from Full & Final Settlement Amount or Refer to Collections/Vigilance/Legal

Wing

Following are the actionable in case of no response from the Employee to the notices sent:

• HR team shall adjust the outstanding loan amount from the Employee’s FFS amount, in case amount is due to the employee.

• If the outstanding loan amount is greater than the F&F amount, the amount available under F&F will be adjusted and case will be referred further to Collection team for recovery of balance outstanding.

• In case of Employee Fraud, the F&F amount will be adjusted after adjusting the fraud amount identified against the defaulted staff before recovery of the outstanding loan amount.

# After 60 days from the date of default, Collections team shall visit Employee’s House for collections

# If the Employee does not make payment even after House Visit, Recovery Notice shall be sent through lawyer for payment of OD amount with the timeline of 7 days for employee to respond.

# In case of no response from Employee within the given timeline, vigilance/collection team shall intimate Regional HR Team to deposit Security cheques collected in the USFBL based on the OD amount.

# In case of dishonour of security cheque for ‘insufficient funds’, Regional HR Team should ensure to submit the dishonour Memo accompanying bounced Security Cheque to the Regional Vigilance Manager within 21 days TAT.

# Regional Vigilance Manager shall proceed legally and ensure below actionable:

• Intimation to concerned supervisor and Regional HR Manager on cases decided for

Confidential


Case filing.

• Proceed legally for cases recommended by RFCM (Regional Fraud Control Meeting).

• Retrieval of Employees loan documents within 7 working days from Regional HR

Team for case filing.

• If the employee is absconding, Vigilance should file legal suit against the guarantor who has signed the Deed of Guarantee.

• Summarized version of Legal Cases to be discussed in RFCM.

HR Department shall not release the experience letter and relieving letter until the outstanding loan amount is fully settled.

General Ledgers maintained for Staff Recoverable

20.3. Receivables from Staff Any amount collected under the staff fraud committed which were not against any customer and the recovery of late payments of staff loan and mobile advances will be credited into the “Receivables from Staff” Account.

21. DOCUMENT PRESERVATION All physical records and documents related to collection functions will be preserved for 8 years after it is created. Post 8 years it will be destroyed with a noting kept for it by NCM. All records & documents stored electronically will be kept beyond 8 year. All call recordings has to be preserved for 12 months by the call center, post which it would be written in a DVD and given to Ujjivan for archival. Collection documents in Micro finance loans

• Write off memo and supporting documents such as KYC, death certificate in case of

deceased clients.

• Postal proof of all notices sent to borrowers

• IC4 audit trial

• Suite filed accounts (Total proceeding with hearing documents & award copy)

Confidential


• Copy of Settlement letter

Collection documents in Housing and MSE

• Suite filed accounts (Total proceeding with hearing documents & award copy)

• Postal proof of all notices sent to borrowers

• Pre repo notice and post repot notice

• Repossession kit

• SARFAESI Panchnama document

• Mortgaged Asset Valuation document

• Pre-‐sale notice, post-‐sale notice

• Newspaper advertisement

• Write off memo and supporting documents such as KYC, death certificate in case of

deceased clients.

• Copy of Settlement letter

22. PROVISIONING NORMS Following provisioning Norms shall be applicable for Unsecured and secured loans. 23

Unsecured Loans Asset classification Days past due GL IL MSE Unsecured Loans

Standard asset 0-‐ 07 days Min 0.65% Min 1% Min 1%

Standard asset 8-‐ 30 days 5% 5% 5%

Standard asset 31-‐ 60 days 30% 30% 30%

Standard asset 61-‐ 90 Days 50% 50% 50%

Substandard asset 91-‐ 180 days 80% 80% 80%

Substandard asset 181-‐360 Days 100% 100% 100%

Substandard asset >366 Days 100% 100% 100%

Rescheduled Loans 50% 50% 50% 50% Total minimum Provisions on total portfolio 1% 2% 1.5%

Secured Loans

23Please refer Ujjivan NPA Policy for details.

Confidential


Asset classification Days past due SHL SBL

Standard asset 0-‐ 07 days 1% 1%



Standard asset 61-‐ 90 Days 50% 50%

Substandard asset 91-‐ 180 days 80% 80%

Substandard asset 181-‐360 Days 100% 100%

Doubtful-‐1 366 -‐545 days 100% 100%

Doubtful-‐1 546 -‐720 days 100% 100%

Doubtful-‐1 721 -‐970 days 100% 100%

Doubtful-‐2 971-‐1000 days 100% 100%

Loss Asset 1551 days+ 100% 100%

Rescheduled Loans 35% 35%

23. ANNEXURE 1: Abbreviations

No. Abbreviation Description

1 ACH Automated Clearing House 2 ACM Area Collection Manager 3 AO Authorized Officer 4 ARC Asset Reconstruction Company 5 CAP Corrective Action Plan 6 CBH Cluster Branch Head 7 CC Cash Credit 8 CEO Chief Executive Officer 9 CIBIL Credit Information Bureau (India) Limited 10 CMS Cash Management Services 11 CO Collections Officer 12 COM Collections Operation Manager 13 COP Central Operations 14 DCR Daily Collection Report 15 DOP Delegation of power 16 DPD Days past due 17 DRA Debt Recovery Agent 18 DRT & DRAT Debt Recovery Tribunal & Debt Recovery Appellate Tribunal 19 ECS Electronic clearing service 20 EMI Equated Monthly Installment 21 FI Financial Institutions 22 HO Head Office 23 IL Individual Lending 24 JLG Joint Liability Group 25 LAP Loan Against Property 26 LO Loan Officer 27 MOB Month on board 28 MSE Micro, Small Enterprise

Confidential


29 MSME Micro Small and Medium Enterprises 30 NBFC Non-‐Banking Financial Company 31 NCM National Collection Manager 32 NOC No-‐objection certificate 33 NPA Non-‐Performing Assets 34 OD Overdraft 35 OTS One Time Settlement 36 PDC Postdated cheques 37 POS Principal Outstanding 38 PTP Promise to pay 39 PP Post pones 40 RBI Reserve Bank of India 41 RCM Regional Collection Manager 42 RMCB Risk Management Committee of the Board 43 RO Relationship Officer 44 USFBL Ujjivan Small Finance Bank Ltd 45 SMA Special Mention Account 46 SMS Short message service 47 SPDC Security postdated cheque

24. ANNEXURE 2: References to Key RBI Circulars

No. Circular Issue Date

(i) Circular -‐ Guidance Note on Credit Risk Management September 20, 2001

(ii) Master Circular -‐ Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances

July 1, 2015

(iii) Master Circular on Wilful Defaulters July 1, 2015

(iv) Circular on Recovery Agents engaged by Banks April 24, 2008

(v) Framework for Revitalizing Distressed Assets in the Economy – Guidelines on Joint Lenders’ Forum (JLF) and Corrective Action Plan (CAP)

February 26, 2014

(vi) Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises (MSMEs)

March 17, 2016

(vii) Prudential Norms on Change in Ownership of Borrowing Entities (Outside Strategic Debt Restructuring Scheme)

September 24, 2015

(viii) Guidelines on One-‐Time Settlement Scheme for SME Accounts September 3, 2005

(ix) Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks

November 3, 2006

Confidential


25. ANNEXURE 3: Notice Formats

ANNEXURE – A

GL -‐ 1st Reminder Notice To,

__<Insert Customer Name>______________

___<Insert Address line 1>_______________

___ <Insert Address Line 2>______________

__<insert Sate and Pin code>_____________

Subject: Notice for payment of overdue amount

This is to bring to your notice that, your above said loan account is showing an overdue of Rs<Insert

Overdue Amount> from <insert Installment Due date>which is due and payable.

Please arrange to make payment of this account on or before <Insert deadline date>, if you cannot make full

payment at this time, please contact us to make a payment which is mutually acceptable.

Please note that, we are required to share your credit history to Credit Bureau agencies authorized by the

RBI (Reserve Bank of India) and this may impact your ability to avail credit facilities from any other financial

institutions in future. We wish to hence inform you to pay the necessary dues in a timely manner in order

to maintain a clear credit history and enjoy benefits of other financial products.

Date < Insert Notice generated date>

Branch < Insert Branch ID& Name >

Customer ID < Insert Customer ID>

Loan Account No < Insert Account ID >

Sanctioned amount (Rs) < Insert Loan Amount sanctioned >

Current outstanding (Rs) < Insert loan outstanding>

Confidential


Your prompt attention to this matter would be greatly appreciated. If you have any queries regarding this

account, please contact our branch office nearest to your area.

If the payment has recently been made, please accept our acknowledgement and ignore this memo.

With regards,

Ujjivan Financial Services Ltd

Authorized Signatory

ANNEXURE – B

GL -‐ 2nd Reminder Notice

To,






With reference to the letter dated <1ST Reminder notice date>this is to bring to your notice that, your

above said loan account is showing an overdue of Rs<Insert Overdue Amount>from <Insert Installment Due

date>which is due and payable

We are sorry to note that despite repeated requests, tele-‐calls and personal visits you have defaulted and

failed to repay the monthly installments on their respective due dates.











Confidential







With regards,



ANNEXURE – C

GL -‐ Final Reminder Notice

To,






With reference to our earlier reminders to settle the arrear amount of Rs<Insert Overdue

Amount>which was due to be paid on <insert Installment Due date>, remains unpaid despite of repeated

requests, tele-‐calls and personal visits.

We demand that the payment of the full amount should be made to us on or before <Insert deadline date>.

In the event of non-‐settlement of outstanding, Ujjivan reserves the right to commence legal proceedings to

recover the debt without further notice to you, and you may be responsible for any associated legal fees or

collection costs.







Confidential


Please visit our branch office nearest to your area as a matter of urgency and settle your account before

the above date.


With regards,



ANNEXURE – D

SHL/IL/MSE -‐ 1st Reminder Notice

To,






This is to bring to your notice that, your above said loan account is showing an overdue of Rs<Insert

Overdue Amount>from <insert Installment Due date>which is due and payable

Please note that due to delay in payment of monthly installment, it has attracted bounce charges and

other contractual charges, which add up to Rs<Insert OD Amount including Charges>. Please arrange to make

payment of this account on or before <Insert deadline date>, if you cannot make full payment at this time,

please contact us to make a payment which is mutually acceptable.







Confidential









With regards,



ANNEXURE – E

SHL/IL/MSE -‐ 2nd Reminder Notice

To,






With reference to the letter dated <1ST Reminder notice date>this is to bring to your notice that, your above said loan account is showing an overdue of Rs<Insert Overdue Amount>from <insert Installment Due

date>which is due and payable

Please note that due to delay in payment of monthly installment, it has attracted bounce charges and other contractual charges, which add up to Rs<Insert OD Amount including Charges>. Please arrange to make payment of this account on or before <Insert deadline date>, if you cannot make full payment at this time, please contact us to make a payment which is mutually acceptable.







Confidential


We are sorry to note that despite repeated requests, tele-‐calls and personal visits you have defaulted and failed to repay the monthly installment on the due date.

Please note that, we are required to share your credit history to Credit Bureau agencies authorized by the RBI (Reserve Bank of India) and this may impact your ability to avail credit facilities from any other financial institutions in future. We wish to hence inform you to pay the necessary dues in a timely manner in order to maintain a clear credit history and enjoy benefits of other financial products. Your prompt attention to this matter would be greatly appreciated. If you have any queries regarding this account, please contact our branch office nearest to your area.


With regards, Ujjivan Financial Services Ltd Authorized Signatory

ANNEXURE – F

SHL/IL/MSE -‐ Final Reminder Notice

To,







Amount>which was due to be paid on <insert Installment Due date>,remains unpaid despite of repeated









Confidential




collection costs.


the above date.


With regards,



ANNEXURE – G

SHL/IL/MSE -‐ Company Notice/Guarantor Notice

To,

__<Insert Guarantor Name>______________




Subject: Payment of remaining overdue amount of your guaranteed customer

Ujjivan hereby would like to bring to your notice that -‐ you have agreed to be the Guarantor for the loan taken by < Insert Customer Name>agreement dated < Insert Loan Disbursement Date>with your own







Confidential


interest and therefore, you are liable to repay the overdue amount of your guarantee as per the terms and conditions signed by you prior. (Below is your guarantee’s loan detail)

With reference to the above subject, this letter is to inform you that your Guarantee’s Individual Loan taken for the purpose < Insert Loan purpose> from Ujjivan Financial Services Ltd. is overdue from <insert Installment Due date> to the extent of Rs.<Insert Overdue Amount>. The total outstanding balance of your Guarantee’s loan is Rs.< Insert loan outstanding>. In this regard you are requested visit < Insert Branch ID& Name

>Ujjivan branch office and pay the overdue amount before <Insert deadline date>, in one shot or in installments. In the event of any further delay, we will be forced to inform any credit bureau, financial institution or any agency authorized by the RBI (Reserve Bank of India) as per the loan agreement between us.

Also failing to this we will be executing legal case against you as per the agreed terms and conditions in the deed & guarantee signed and submitted by you.

With regards,



ANNEXURE – H

PRAGATHI LOAN -‐ 1st Reminder Notice

To,












Confidential


This is to bring to your notice that, your above said loan account is showing an overdue of <Insert

Overdue Amount>from <insert Installment Due date>which is due and payable










With regards,



ANNEXURE – I

PRAGATHI LOAN -‐ 2nd Reminder Notice

To,












Confidential


With reference to the letter dated <1ST Reminder notice date>this is to bring to your notice that, your

above said loan account is showing an overdue of Rs<Insert Overdue Amount>from <insert Installment Due

date>which is due and payable.



We are sorry to note that despite repeated requests, tele-‐calls and personal visits you have defaulted and

failed to repay the monthly installment on the due date.








With regards, Ujjivan Financial Services Ltd


ANNEXURE – J

PRAGATHI LOAN -‐ Final Reminder Notice

To,











Confidential




Amount>which was due to be paid on <insert Installment Due date>,remains unpaid despite of repeated





collection costs.


the above date.


With regards,



ANNEXURE -‐ K

LOAN RECALL NOTICE AT 90 DPD

(on Ujjivan letter head)

To,(Name and address of the customer)

Sub : Loan account number ………….

Confidential


Dear Sir/Madam

Inspite of repeated reminders you have failed to adhere to the terms and conditions expressly agreed by you vide the Agreement entered between us for the said loan and you have failed to maintain the financial discipline required of you with the said loan. Thus we are constrained to state as under:

That pursuant to the rights vested with Ujjivan Ltd, your entire loan (principal and interest) is being recalled forthwith.

You are required to make payment the whole of the amount due and outstanding’s by you, under the said Agreement, to us and amounting to Rs ………… within 7 days from the date of postage of this notice.

In case of non-‐payment by the aforesaid date, we will be constrained to take legal recourse against you entirely at your risk as to costs and consequences thereof.

No further notice will be given to you in this regard.

Thanking you,

For Ujjivan Financial Services Ltd.,

Authorized Signature

ANNEXURE – L

Possession cum sale notice of immovable property under mortgage under SARFAESI Act 2002

Whereas

Confidential


The undersigned being the Authorized Officer of the Ujjivan under the Securitisation and Reconstruction of the Financial Assets and Enforcement of Security Interest Act herein after termed as SARFAESI Act 2002 and in exercise of powers conferred under Section 13 (12) read with Rule 9 of the Security Interest (Enforcement) Rules, 2002 issued demand notices on different dates calling upon the borrowers / mortgagors of the secured interest as mentioned hereinafter to repay the amount mentioned in the notice within 60 days from the date of receipt of the said notice. The borrower(s) / guarantor(s)/ Mortgagor(s)/ Legal Heir(s) having failed to repay the amount, the undersigned has taken possession of the property described herein below in exercise of powers conferred under Section 13(4) of the said Act read with Rule 9 on different dates and OFFERS are invited by the undersigned in sealed cover for purchase of immovable properties on ‘‘AS IS WHERE IS BASIS’’ and ‘’AS IS WHAT IS BASIS’’ as per brief particulars given here under. The borrower(s) / guarantor(s) / mortgagor(s) in particular and the public in general are hereby cautioned not to deal with the property and any dealings with the property will be subject to the charge of Ujjivan, undernoted Branches for an amount as mentioned against each account herein below and interest thereon.

Sl No.

Name of the Account & Branch

Name of the Borrower / Guarantor (Owner of the property)

Description of the charged/ mortgaged property (All the part and parcel of the property consisting of)

Amount O/S as on date of Demand Notice (Rs.) & Date of taking possession

Reserve Price

(Amt. in lacs)

LAST DATE & PLACE OF RECEIVING OFFERS : ………………

AT UJJIVAN, ………………………..

DATE & PLACE OF OPENING TENDERS: …………………………….

AT I UJJIVAN, …………………………..

Terms & Conditions:

1] Interested parties will send/submit their offers for purchase of the said property in sealed cover super scribing as "Offer for Sale of Assets at -‐ (write the address of the asset) -‐ A/c. (write the name of a/c. & Branch)" along with earnest money deposit equivalent to 10% (ten percent) of Reserve Price of the property by Cheque/Demand Draft favoring the Authorized Officer, Ujjivan payable at ………, which is refundable, if the bid/tender is not accepted. Offer should reach us latest by the ………….. at the above mentioned address. Offers without earnest money deposit will summarily be rejected.

2] The successful bidder shall deposit 25% (Twenty-‐five percent) of the bid amount immediately by Cheque/Demand Draft favoring the Authorized Officer, Ujjivan payable at ……, on the sale being knocked down in his favor. In case, the successful bidder fails to deposit 25% of the bid amount immediately on the

Confidential


sale being knocked down in his favor the entire deposit made by the bidder towards earnest money shall be forfeited without any notice and the property/ies shall forthwith be resold.

3] The balance amount of the purchase money shall be paid to the Authorized Officer, Ujjivan on or before the 15th (fifteenth) day of confirmation of sale in default of payment within the said period, the entire deposit made by the bidder together with the earnest money shall be forfeited without any notice and the properties shall be resold.

4] The defaulting purchaser shall forfeit all claims to the property or to any part of the sum for which it will be subsequently sold.

5] All such payments to be made only in the form of cash or Cheques or Demand Draft drawn in favor of the Authorized Office, Ujjivan.

6] The successful bidder would bear the charges/fees payable for conveyance such as stamp duty. Registration fees etc. as applicable as per law.

7] The Authorized Officer will not be responsible for any charge, lien, encumbrance, property tax or any other dues to the Govt. or anybody in respect of the property under sale.

8] The Authorized Officer has the absolute right to accept or reject any tender/bid or adjourn/postpone the sale without assigning any reason therefor.

9] The sale is subject to confirmation by the Ujjivan.

10] For Inspection of the property, the intending bidders will contact Ujjivan, …………..during office hours, latest by …………..

This publication is also a notice of possession cum sale under the above Act to borrowers/guarantors/mortgagers/owners of the property as mentioned above.

Date : ……

Authorized Officer, Ujjivan

Place: ……….

26. ANNEXURE 4: IC 4 Workflows with OD reasons

Confidential


Detailed WF.xlsx

Standard Reasons and Remarks for all products in IC4 SL NO. STD CAT

CODE STD CATEGORY SUB CATEGORY DEFINITION

1 DEC DECEASED

Deceased Customer

Deceased customer and intimation sent to Insurance Team

Deceased Spouse

Deceased customer's spouse and intimation sent to Insurance Team

2 ABS ABSCOND Absconded

Customer or whole family left the City/village, new address unknown to group members/neighbors and customer not traceable

3 FIN FINANCIAL DISTRESS

Business Loss/ Temporary Loss

Customer or Spouse facing short term financial problems in business/Sudden cash needs/Slowdown in business (Seasonality)

Cattle Death This category is for only livestock cases where customer is facing financial problems due to cattle death.

Job Loss Customer/Earning Member has lost his/her Job. They do not have any other source for repayment

Medical reasons -‐ Permanent

Permanent disability or serious illness of an earning member/Customer

Medical reasons -‐ Temporary

Illness of a family member/Customer and Sudden cash needs leading to diversion of funds

Other family member death

Death in the family and unable to pay on time.

Part Salary received

Customer/Earning Member have received part salary

Salary not received

Customer/Earning member have not received their due wages/salary

Multiple Borrower

Customer taken loans from other financiers and is unable to pay her emi due to indebtedness

Irregular Payer Untimely repayments being made by the borrower

Confidential


4 MSD MASS DEFAULT

Ring leader Influence

Local area/ Ring leader influencing borrowers not to repay the EMIs in an particular center/area

Community issues -‐ External

Religious heads, Communal Organizations and Local Government Administration have instructed not to repay the loan

Demolition Local or Government Administration has ordered demolition of the whole area or a part of the area

Political issue Political parties or person interrupting into the particular area/Group/members for giving false statement to stop the repayment.

Natural Calamities

Default caused due to Flood, Draught, earth quake etc. and epidemic diseases (rapid spread of infectious diseases in an large population in particular area)

5 SBL SUB LENDING

Ghost/Benami Loan

Where a customer avails loans by submitting another individual’s documents and/or by way of misrepresentation of facts/Dummy loans created where in the borrower does not exist

Sub Lending Whole or part of the loan amount has been given by the borrower to another member or to a third party often referred to as ‘ring leader’ usually on payment of a commission.

6 SRI SERVICE ISSUE Service/ Behavior issues

Concerned branch staff are not responding to customer queries or have miscommunicated product features/ made false commitments. Staff has misbehaved during collections

7 STF STAFF FRAUD Staff fraud

Defaults may occur due to fraud committed by Ujjivan staff which may include misappropriation of customer’s money, taking loans from customers, creating phantom loans and collecting excess fees / charges from customers or collecting repayments ahead of the due dates & not accounting the same

8 TCI TECHNICAL REASON

Technical reasons

Exact repayments are not updated to the right customer’s account/CMD Change/Loan card Repayment Date mismatch/Wrong repayment schedule/ECS or ACH status not received etc.

Confidential


9 TNC TEMPORARILY

NOT CONTACTABLE

Temporarily not contactable

Customer is not available during visit/door Locked/Not reachable or is not receiving the call

House Shifted Shifted House to nearby area

10 WLD WILFUL DEFAULT

WILLFUL DEFAULT

Customer has ability to repay but has no intention or commitment to repay. Customer who does not pay for >60 Days in GL will be classified as a willful defaulter & field collections will take over collections

11 LGL LEGAL Initiate 138 Criminal Case initiation for IL customer with

cheque

Initiate Civil Civil cases initiation for GL and IL customer where cheques are not available

26.1. ANNEXURE 5: IC4 Auto Report formats

collection!policy! - ujjivan sfb&!resolutionmechanism! ... tools!for!recovery! ......

Documents