Daybreak - Why mental health professionals are taking up courses on banking and finance

Episode Date: March 18, 2024

Have you noticed how easy it has become to get loans? Whether you want to buy a whole house or you want to buy a pair of shoes, you can take an EMI for whatever you want.And of course, in India, an aspirational country, this means we finally have a way to attain the standard of living we have dreamed of. In the year that ended in March 2023 household debt saw its second-highest surge since independence. It now makes up almost 6% of the country’s GDP. But as indebtedness is rising, so are cases of harassment by recovery agents. In fact, now, it's come to a point where it is giving rise to a unique type of mental health crisis–unique enough for mental health professionals to take up courses on the basics of banking and finance.Tune in.Also listen to: How Mahindra Finance dealt with the RBI curb on recovering loans via third party agentsDaybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.   

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too? It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. I don't know about you, but my love for Sharukhan is blind. So even though Jovan is not the usual type of movie that I like watching,

I still went for it. But I will save you from my critical comment. What I want to talk about though is one particular scene from the movie where a farmer, who is the father of one of the girls from SRK's A-Team, decides to take his own life. Because he bought a tractor on EMI for his farm, but he doesn't have enough money to pay it back. Now, in a movie that is packed with the usual Bollywood action, drama, etc., etc., this particular scene really stood out to me. And that is because it reminded me of this heart-wrenching incident that it is most likely based on.

In fact, I'd even done a daybreak episode on it. I'll link it to the show notes of this one. It was about this pregnant woman who was crushed under a tractor being driven by a recovery agent of Mahindra Finance, a company from where her father had taken the tractor on loan. He wasn't able to pay back because of the pandemic. it was in the middle of the second wave, and the family pleaded to the agents saying that they would not be able to make a living without the tractor, so do not take it away, but to no avail. And that is when the woman stepped in front of the tractor that was being driven away by the recovery agent. The company eventually decided not to take it away, but it was too late.

And the public anger that followed was unprecedented. In fact, the RBI stepped in and banned Mahindra finance from hiring third-party agents to recover their bad loans. And why am I telling you about this today? Because it is not just farmers who are suffering. Have you realized how easy it has become to get loans? Whether you want to buy a whole house or you want to buy a pair of shoes. You can take an EMI for whatever you want.

And of course, in India, where we are an aspirational people, this means that we have finally got a way to attain the standard of living that we have been dreaming of. You know, like the movies, right? In the year that ended in March 2020, household debt saw its second highest surge since independence. It now makes up almost 6% of the country's GDP or gross domestic product. we should take a moment to process that. So as indebtedness is rising, so are the cases of harassment by recovery agents. In fact, now it has come to a point where it is giving rise to a very unique type of mental health crisis in the country. Unique enough for mental health professionals to take up courses on the basics of finance and banking.

Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nick Dan Sharma, and I don't chase the news cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. To begin with, let us set the stage. Like I told you earlier, debt is shooting up. Household debt rose from around 4% of the GDP in the previous financial year to 6% in the year that ended in March 23.

And you know the last time when it was close to this? this high. It was in 2007 before the global recession when it hit nearly 7%. Now, here is where it gets a bit more worrying. As household debt is rising, household savings are declining. It fell from over 7% of the GDP to around 5% in the span of a year. But at the same time, banks and NBFCs or non-banking finance companies are offering you more and more loans. So it is not surprising that in such a situation, banks are relying heavily on recovery agents because there are more and more cases of bad loans. Between April 2021 and November 22, the RBI or the Reserve Bank of India received nearly 13,000 complaints against recovery agents. And RBI

official told my colleague the Ken reporter Ronak Kumar Gunjan and I'm quoting him, for this calendar year itself, the complaints will hit 10,000. Data for the financial year is yet to be compiled. End quote. Ronuk also spoke to a senior member of Public Policy think tank Niti Ayyog and also two private sector bank executives. And they seem to agree. They blame the spike in complaints on the fierce competition among loan recovery. agencies. And these agencies operate on low margins and the one that promises to get or gets the highest amount of recoveries is hired by the banks and NBFCs. So naturally, these agents have targets to meet. And by the way, if you think they must be getting paid a lot, that is not really

the case. Their basic salaries are around 10 to 12,000 a month and the rest depends on how much they can recover or collect. Now, think about to what lengths these agents would go to to recover as much as possible. And here is where the mental health crisis starts to kick in. Stay tuned for more. My colleague Ronuk spoke to multiple psychiatrists, therapists and online mental health service providers, and they're all pointing out to the same trend. Debt-related mental health issues are rising at an alarming rate. Take Sanchi Ahuja, for example. She is a Delhi-based mental health professional.

When Ronuk met her, she had just finished her fifth session of the day. She was visibly tired, but her day was still not over. And it was not a pending therapy session. She had to complete an online course on the basics of banking, to help her understand the lending jargon and the perspectives of her clients better. It is for the first time, in her nearly 20-year-long career that she is dealing with an unusually large number of clients who are experiencing debt-related stress.

But it would have to be really, really bad for it to get to this point, right? Let me give you an example. Imagine I took a loan of a little over a lack to furnish my apartment. Now, please pray that this doesn't actually happen to me, but I lose my job. and I end up defaulting on my EMI's. Recovery agents start calling me and threatening me, which is pretty normal for them. I mean, threatening over calls,

but I can't pay and they are relentless. After three months, they land up in my house and not only threaten me, but they also abuse my father and tell my entire family about my inability to pay the EMI's. If this is not enough to cause mental trauma, than what is. Unfortunately, this actually happened to a 24-year-old graphic designer from Nagpur who has been

suicidal ever since. Thankfully, he's been in therapy for the last three months. I mean, these recovery agents were so scary that they actually threatened to post fake nudes of this graphic designer. So a lot of this mental health crisis has to do with the tactics that these recovery agents are using to recover the loan money. They are absolutely unhinged. But why are there no rules and regulations?

I will tell you in the next segment. You see, public sector banks use tenders to find recovery agencies. And private lenders have a partnership model. But in both these cases, these big debt collection companies outsource the work to smaller agencies for better reach. and here is where things get shady. Becoming a recovery agent in India requires completing an Indian Bank's Association certified course through any of the 13 empaneled private institutes across the country. The course contains the RBI's guidelines on debt recovery and soft skills needed for interactions

with borrowers. Over 3,000 agents in the country have been officially trained so far. But most of these smaller agencies use agents who are uncertified. They have no training whatsoever. Plus, they get a meager salary. My colleague Ronuk visited one such agency in Delhi, ironically called Nirvana. A person that he spoke to from there told him, and I'm quoting, the industry runs on a simple rule. The agency that recovers the maximum amount at the lowest cost gets the next deal.

competition is fierce. So who cares about training and soft skills? End quote. Banks, of course, deny using these agencies. But the RBI has been coming down heavily on lenders for not complying with certain directives on loan recovery agents. For example, the Mahindra finance case. Since the beginning of 2023, it has imposed huge fines on many of these banks, including RBL Bank, Access Bank, HOTACMAHMahinda Bank, to name a few. But the RBI official that I mentioned earlier who spoke to the Ken told us that there is no central repository of blacklisted recovery agencies. So when a company gets banned by a lender, they keep working for others, which is why the vicious cycle continues. For now though, at least we have mental health professionals who are

stepping up to deal with this emerging crisis. Many mental health institutes are hiring professionals who have a background in finance or economics. But the important question to ask over here is how many people, especially from smaller towns and rural areas who are suffering from debt-related issues, will actually get access to these expert mental health professionals? Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings.

A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps, and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host, and today's episode was edited by my colleague Rajiv Sien.