1. GULFNEWSTUESDAY,MAY19,2009
Banks urged to
bolster collections
in times ofcrisis
Loan default potential to rise amid slowdown
By RACHNA UPPAL ~~ Collections
StaffReporter _has to be at
DubaiThe slowdownin the the top of
global economy and its im- . .
pact on the region has in- the orgamsatIOn
creased the need.for banks chart. Collection
to strengthen theIr budgets.. .
for collections and proce- IS a SCIence ...WIth
dures as the potential ~or different tools and
loan defaults 1Ocreases, 10-
dustry insiders say. techniques to collect
The current environment "
has also brought into focus money.
the need for credit bureaus,
allowing banks to cross- SanjoySen
checkthe credit historyof Consumerbankinghead,Citibank
potential customers. Ac-
cording to Sanjoy Sen, the
consumer bank head for through an analytics-based
the Middle East region at risk assessment including,
Citibank, now is the time but not exclusively, collec-
for the normally discreet tions scorecards, autodial-
collections and recovery ers (which increases the
divisions of a bank to be number of calls that can be
given more prominence. made to customers without
"Collections has to be at the need for direct callers),
the top of the organisation and an assessment of which
chart. Collection is a sci- customers have a tendency
ence... with different tools to skip on payments.
and techniques to collect However, the lack of a re-
money," Sen said on the side- liable credit bureau agency
lines of the Cards Middle in the UAE is an enduring
East conference in Dubai. obstacle for banks which
"The whole thing about needs addressing, and
collections is you have to makes loan recovery in this
be early in the game," he region more challenging.
added. .
The ease of credit avail- Moderating exposure
ability in the last few years "As an.9-when you build
has resulted in consider- a credit bureau, it takes on
ably high debt to income ra- the role of moderating the
tios. These refer to the level level of exposure," Sen said.
of income per month which At a federal level, only
goes towards repaying debt. the Central Bank provides
Now, job losses and salary data on credit history in the -freezes, combined with a UAE and that too on loans
tightening credit market, of more than DhSOO,OOO.
are contributing to difficul- On March 10, the Federal
ties in loan repayments. National Council in the UAE
"I think banks will see a approved a draft law which
rise in credit losses - the proposed the creation of
industry has seen a rise, but a federal credit informa-
it is not excessive. 1 think tion company, to reduce the
banks are in good financial number of unpaid loans and
health but there has been a help financial institutions
reduction in credit growth, . makelendingdecisions.
which is normal," says Amp At the emirate level,
Mukhopadhyay, group head Dubai's Department of
of retail banking at Abu Economic Development
Dhabi Commercial Bank. (DED) established Em-
According to Sen, co 1- credit in 2006, an inde-
I lections ,departments can pendent credit information
preempt such difficulties company.