Q.1 What is Arms?


Arms’ parent company Arcil is engaged in the acquisition and resolution of corporate and mid-cap segment of Non-Performing Loans (NPLs). With the growth in retail/consumer NPLs, this segment also becomes a natural extension of our business activity. Arms was formed to address this segment.


Arms’ core strength for retail and consumer loan default resolution is derived from its lineage, which gives it a platform to launch a scalable and robust business model. Our sponsors account for more than half of India’s banking landscape. We believe that Arms can play a significant role in organising this industry and setting the best-practice benchmarks for others to follow.



Q.2 Are there any other entities doing the same business as Arms in an organised manner?


There are a number of agents in the country who are engaged in retail and consumer loan recovery. We do not claim that no one else is doing this in an organised manner. We feel that this segment needs an organisation that can lead this industry and introduce best practices suitable to our country. Arms has the right kind of platform and capacity to build this business, and can play a significant role in growing it.



Q.3 How does Arms approach debt resolution?


The first step in our approach is to understand the intent behind the default situation and understand if the borrower is keen to address the situation, willing to assume responsibility and willing to cooperate.


In case the borrower is willing to cooperate, our Resolution Counsellors will offer him or her suitable options to address the default. These could include extension of repayment period, settlement, an alternative arrangement for structured repayment (in deserving cases) or even loan foreclosure by selling the borrower’s collaterals with his or her cooperation. The borrower needs to disclose his or her financial situation in detail to justify the resolution approach.


However, if the borrower is not willing to cooperate, we adopt a no-nonsense approach in accordance with the law.



Q.4 How does Arms avoid the problems of recovery agents?


Arms is focused on resolution, rather than mere recovery. Recovery means collection of dues from the defaulter disregarding his or her capacity to pay. Resolution means finding a solution to the problem behind the inability of the borrower to pay up. To maintain our focus, we have a set of clearly-defined Do’s and Don’ts, taking into account Fair Debt Collection Practice (FDCP) as part of our training process.



Q.5 How are resolution officers different from recovery agents?


Recovery agents usually recover money upfront and settle or foreclose the loan with the borrower. Our Resolution Counsellors take into account the borrower’s perspective, and make all efforts to find a solution to the borrower’s inability to repay the debt. Of course, the borrower needs to realize the dimension of the problem and be willing to co-operate with our resolution counsellors. In case the borrower is unwilling to cooperate or not interested in repaying the loan, we will resort to legal measures.



Q.6 How does Arms ensure that its training is implemented on-ground?


Training itself does not ensure its successful implementation. So, we create an appropriate culture and strict discipline to ensure its implementation on-ground. Firstly, we have a stringent recruitment process to select Resolution Counsellors with the right kind of attitude and traits. Secondly, we also deploy senior supervisors drawn from a pool of ex-servicemen to handle implementation challenges. Thirdly, we motivate our people with an appropriate incentive structure and career progression path.


We also take strict disciplinary action against Resolution Counsellors who flout FDCP norms. We have set up feedback and redressal mechanisms to address any concerns about our Resolution Counsellors’ behaviour in the field.



Q.7 Is every Resolution Counsellor an employee of Arms or a third-party agent?

Every  Resolution Counsellor shall be recruited and trained by us, whether they are our direct employees or on the rolls of our service providers.



Q.8 Does Arms’ process differ from what banks have been doing in terms of loan defaults, like attaching assets, etc.?


Our approach is to separate the borrowers who are willing to assume responsibility for the situation, keen to cure the default and willing to co-operate, from difficult borrowers, who default by choice without any plausible reason or intentional default situation. Our Resolution Counsellors provide suitable options, which may include longer repayment schedules, settlement, alternative repayment arrangements, or even loan foreclosure by selling collaterals with the borrower’s co-operation.


In contrast, a bank’s approach to default would be collection of the overdue amount or a settlement or with the borrower.


As a last resort, we handle difficult borrowers with a no-nonsense approach in accordance with the law. This may include taking possession of secured or mortgaged assets under the Securitisation Act of 2002.



Q.9 What technology and software does Arms use in its business?


Arms uses software that has been custom-developed for our retail and consumer loan resolution business. This is a first-of-its-kind enterprise-based platform on Service Oriented Architecture, with focus only on collection. It takes care of receivables management and monitoring from origination (takeover of the default loan) to collection during the life of the loan. It also enables automation of the history of customer interactions and responses, which helps in grading and categorisation of the risk profile after the default.



Q.10 What will be the borrower’s role in this entire process?


The borrower needs to understand that borrowing enables faster growth; but this can be achieved only with responsible behaviour. The fallout of a higher default rate with irresponsible borrowing in any society will only make borrowing expensive and difficult, which is counterproductive to growth. Therefore, he or she needs to be keen to address the default, willing to assume responsibility for the situation, and willing to cooperate to find a solution. He or she also needs to be honest in disclosing his or her financial position to us in detail to justify the resolution approach.



Q.11 How can Arms help develop a responsible borrowing culture amongst intentional defaulters?


The process of making a defaulter feel responsible for the situation is nothing but a depiction of a responsible borrowing culture. It is like a second life, an opportunity to start again. This service is presently not available in the country. Our Resolution Counsellors provide options to resolve debt issues with the borrower’s complete cooperation. We feel this approach will bring in a responsible borrowing culture.



Q.12 Is it safe to say that Indians are responsible borrowers?


Borrowing culture is new to India and, as such, we have yet to embrace it openly without giving up our values.



Q.13 Does Arms have any restrictions on the loans it acquires?


There is no restriction on the acquisition of NPLs by Asset Reconstruction Companies (ARCs). With regard to standard assets, there are some regulatory conditions on banks for selling standard loan assets to ARCs. 


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