Dear Respected All, We are from a Microfinance company where we giving a loan to villagers in small amounts and recover weekly as per Instalment. We Branch manager and Area manager are not able to recover the Instalment from the customers then it is possible to recover the Overdue amount from the branch manager and Area manager.
From India, Delhi
PROFESSIONALS AND BUSINESSES PARTICIPATING IN DISCUSSION
Dinesh Divekar
Business Mentor, Consultant And Trainer
Saswatabanerjee
Partner - Risk Management

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 organisations 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
Further to Dinesh sir post, Fines can not exceed 3% of gross salary of the month. I don't know whether the quantum of NPA is so low as to fit within 3% of gross salary.

In most cases, I would say that this recovery is illegal deduction under Payment of Wages Act (Please see sec 6 and 7), but remember also that the act is currently restricted to those with salary of less than 18,000 a month, so for the others it may be a just a moral standard.

If they are going to recover NPA from your as a standard practice irrespective of cause, then probably you need to change your job

From India, Mumbai
Dear Rajneesh Kumar,

Your Microfinance company granted loan to villagers. The amount so granted in loan the Loanee pays back installments weekly. The amounts of installments collected by your Branch manager and Area manager.

Your allegation is that branch manager & area manager are not able to recover the Instalment from the customers. Your question is, whether is it possible to recover the overdue amount from the branch manager and Area manager! The answer is No.

But you can hold him responsible for the above in two conditions i.e. (i) if there is clause in the service condition that the person shall be held responsible for any irrecoverable amount from the loanee (ii) where the employee recovered the amount but not deposited with company.

A person can not collect the amount from the laonee by force because it amounts criminal offence. To make your loan safe company should bring out some changes in its loan promoting conditions or should take collateral mortgage by reviewing the cases (why people are not baying back the installments).
You can act on your BM & AM for the purpose bad debts owing to their irresponsible behavior or have not taken any steps or not visited the loanee for collection of installment, provided they found responsible for such loss and then can be recovery possible or otherwise NO.

From India, Mumbai

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