Dear Respected All,
We are from a Microfinance company where we give loans to villagers in small amounts and recover them weekly as per installment. If the Branch manager and Area manager are unable to recover the installments from the customers, is it possible to recover the overdue amount from the Branch manager and Area manager.
From India, Delhi
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2We are from a Microfinance company where we give loans to villagers in small amounts and recover them weekly as per installment. If the Branch manager and Area manager are unable to recover the installments from the customers, is it possible to recover the overdue amount from the Branch manager and Area manager.
From India, Delhi
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Rajneesh Kumar Kesarwani,
Generation of Non-Performing Assets (NPAs) is collateral that the banking, as well as non-banking industry, has to live with. NPAs are generated unwittingly. To tide over this challenge, you may insert additional filters to check the creditworthiness of the prospects. To assess the creditworthiness, you may train your staff and find out how to understand the psychology of the future customers. Find out whether or not any pattern emerges from the loan defaulters.
Secondly, you need to make some provisioning to absorb NPAs. If you start recovering the NPAs from the managers, then it could demotivate them. The recovery could deter the other staff, and no one will come forward to take up these positions. Such a situation could also impact your business.
Every business has some or another problem. The owners of the manufacturing organizations have to contend with the non-moving inventory. The IT companies have to grapple with the software engineers who are on the bench. It is impossible for them to keep only those staff who are billable. The problem of low seat occupancy is faced by passenger airlines or bus operators.
Yes, employers have the right to impose fines and penalties against the defaulting employee. However, to prove the misconduct, you need to conduct a domestic enquiry, and if the misconduct is proved, then the punishment can be forfeiture of salary and wages. However, check whether or not the recovered amount has to be deposited in the Labour Welfare Fund (LWF). Check whether or not can it be shown as income by the company.
Any deductions, other than statutory deductions are illegal. Hence you need to follow principles of natural justice before awarding a punishment. Therefore, take a call judiciously.
Thanks,
Dinesh Divekar
From India, Bangalore
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Generation of Non-Performing Assets (NPAs) is collateral that the banking, as well as non-banking industry, has to live with. NPAs are generated unwittingly. To tide over this challenge, you may insert additional filters to check the creditworthiness of the prospects. To assess the creditworthiness, you may train your staff and find out how to understand the psychology of the future customers. Find out whether or not any pattern emerges from the loan defaulters.
Secondly, you need to make some provisioning to absorb NPAs. If you start recovering the NPAs from the managers, then it could demotivate them. The recovery could deter the other staff, and no one will come forward to take up these positions. Such a situation could also impact your business.
Every business has some or another problem. The owners of the manufacturing organizations have to contend with the non-moving inventory. The IT companies have to grapple with the software engineers who are on the bench. It is impossible for them to keep only those staff who are billable. The problem of low seat occupancy is faced by passenger airlines or bus operators.
Yes, employers have the right to impose fines and penalties against the defaulting employee. However, to prove the misconduct, you need to conduct a domestic enquiry, and if the misconduct is proved, then the punishment can be forfeiture of salary and wages. However, check whether or not the recovered amount has to be deposited in the Labour Welfare Fund (LWF). Check whether or not can it be shown as income by the company.
Any deductions, other than statutory deductions are illegal. Hence you need to follow principles of natural justice before awarding a punishment. Therefore, take a call judiciously.
Thanks,
Dinesh Divekar
From India, Bangalore
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Further to Dinesh Sir's post, fines cannot exceed 3% of the gross salary of the month. I don't know whether the quantum of NPA is so low as to fit within 3% of the gross salary.
In most cases, I would say that this recovery is an illegal deduction under the Payment of Wages Act (Please see sections 6 and 7). However, please remember that the act is currently restricted to those with a salary of less than 18,000 a month. For others, it may just be a moral standard.
If they are going to recover NPA from you as a standard practice irrespective of the cause, then you probably need to change your job.
From India, Mumbai
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In most cases, I would say that this recovery is an illegal deduction under the Payment of Wages Act (Please see sections 6 and 7). However, please remember that the act is currently restricted to those with a salary of less than 18,000 a month. For others, it may just be a moral standard.
If they are going to recover NPA from you as a standard practice irrespective of the cause, then you probably need to change your job.
From India, Mumbai
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Dear Rajneesh Kumar,
Your microfinance company granted loans to villagers. The amount granted in the loan is paid back in weekly installments by the loanee. These installments are collected by your branch manager and area manager.
Your allegation is that the branch manager and area manager are not able to recover the installments from the customers. Your question is, is it possible to recover the overdue amount from the branch manager and area manager? The answer is no.
However, you can hold them responsible under two conditions: (i) if there is a clause in the service condition stating that the person shall be held responsible for any irrecoverable amount from the loanee, and (ii) where the employee collected the amount but did not deposit it with the company.
A person cannot collect the amount from the loanee by force as it amounts to a criminal offence. To ensure the safety of your loans, the company should consider making changes to its loan terms or taking collateral mortgages by reviewing cases where people are not paying back the installments.
You can take action against your branch manager and area manager for bad debts due to their irresponsible behavior, lack of initiative, or failure to visit the loanee for installment collection, provided they are found responsible for such losses. Recovery may be possible in such cases, or otherwise not.
Thank you.
From India, Mumbai
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Your microfinance company granted loans to villagers. The amount granted in the loan is paid back in weekly installments by the loanee. These installments are collected by your branch manager and area manager.
Your allegation is that the branch manager and area manager are not able to recover the installments from the customers. Your question is, is it possible to recover the overdue amount from the branch manager and area manager? The answer is no.
However, you can hold them responsible under two conditions: (i) if there is a clause in the service condition stating that the person shall be held responsible for any irrecoverable amount from the loanee, and (ii) where the employee collected the amount but did not deposit it with the company.
A person cannot collect the amount from the loanee by force as it amounts to a criminal offence. To ensure the safety of your loans, the company should consider making changes to its loan terms or taking collateral mortgages by reviewing cases where people are not paying back the installments.
You can take action against your branch manager and area manager for bad debts due to their irresponsible behavior, lack of initiative, or failure to visit the loanee for installment collection, provided they are found responsible for such losses. Recovery may be possible in such cases, or otherwise not.
Thank you.
From India, Mumbai
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