DEFAULTER CASE STUDY

Defaulter study at Power house colony

Default is the single most risk endangering any institution carrying out the business of lending that too rural lending. Despite proper safeguard measures, rural banks are always prone to continuous default and this is prime reason behind limited rural loans on the banks part. In such situation BASIX with its well-defined framework is carrying out its activity, still there are incidences of defaults.BASIX has defined the terms related with default on the part of borrowers and thereby accordingly treats the concerned borrower as defaulter or not. Mere non-payment of installment is not the case of default. The said parameter is considered to decide on the same.Delinquency - A borrower who is overdue in repaying one or more installment by 30days is a delinquent borrower. In case the borrower catches up by repaying overdue installments with the accrued IPD (Interest per Day) for number of overdue days, he/she would be treated as a regular borrower. However, at the final closure of a loan, if it were observed that a borrower has delayed three or more installments, s/he would be treated as delinquent for sanctioning a repeat loan.

Defaulter - A borrower who is overdue in repaying one or more installments of an agri- allied or non-farm or general-purpose loans by 120 days or by 365 days in case of an agricultural crop or long-term loan will be treated as a defaulter.

Willful Defaulter: A borrower who is in a position to repay the loan but deliberately does not repay the loan or installments on time.

CASE STUDY

PROFILE: -

Name of the Borrower : Sunita

Occupation : Clothes Selling

Name of the Village : Power house colony

Loan Number : 0005208

Loan Type : NFS

Amount : 12000/-

Loan Taken on : 27th July’10

Status of the Borrower : Not paid since 40 days

Borrower History : 1st Time borrower

Nominee : Husband

Product Code: 104

Borrower Name: Sunita Village Name: Power house colony

Disbursed Amount : 12000/-

Repaid Principal : 5433/-

Repaid Interest : 1693/-

Repaid insurance : 392/-

Total Repaid ; 7518/-

Principal Outstanding : 6567/-

Interest Accrued : 65/-

ICR Due : 68/-

No. of Days Overdue : 40

Cash Security Available : nilOther Charges Receivable

Interest per Day : 5/-

Case:Sunita is the reputed personality in the village and his credibility is also good in the village, at the time of loaning cp of the individual was done properly.If we look towards his JLG member, the JLG consist of six member

1) Sunita (0005208)2) Dholi Bai (0005206)3) Basanti (0005204)4) Sunita Bai (0005205)5) Rama (0005207)6) Gita (0005209)

All the JLG members except Sunita are paying their installment on regular basis, because they people are affected by the willfulness of Sunita but they are ready to pay their installment. Sunita is willful defaulter, when ever CSR

and concern FX visited his house she always committed to pay installment but still not paying since 40 days.

If we look towards other aspect related to loan disbursement the date of disbursement was 27th July ’10 and after some time she used to create problems for BASIX staff. Sunita is having no financial problem.

CRUX: Main reason behind is that no Police pressure by our company & she thought company nothing do.

Reasons for Default

No police pressure.

What could have been done

Strict recovery process.

Pressurizing the JLG members by police from the beginning.

Police pressure on all members of JLG

Steps to be taken in future

Proper evaluation of cash flow.

Strict recovery process right from the beginning.

Clear communication about JLG responsibility.

Strong communication among mutual guarantors.

Strict monitoring and follow-ups as a regular process.

No loan should be given to the alcoholic person who is directly or

indirectly involved in the JLG.