Karnataka Government – Please onboard BBPS for Loan Recoveries

 

Reference Article for this Blog @ https://www.newindianexpress.com/states/karnataka/2020/aug/22/poor-can-pay-home-loans-via-pigmy-collectors-2186886.html

Synopsis: Rajiv Gandhi Housing Corporation Limited is the nodal agency for enabling affordable flats in the government constructed apartments to the EWS (economically weaker sections) in Karnataka.

Under some schemes, the house owners have to repay the Loans granted by Rajiv Gandhi Housing Corporation Limited.

Karnataka Housing Minister V Somanna desires that there should be a frictionless way of loaner payment by the housing loan borrowers.

One option is collection of loan amounts on a daily basis by Pigmy Collectors ‘ .

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Rajiv Gandhi Housing Corporation Limited was created in the year 2000 as a special purpose vehicle “To provide housing for socially and economically weaker sections of the society through effective implementation of Central and State housing schemes”.

 The Pigmy Collection process is a huge success in Karnataka. The Pigmy Collection process was pioneered by Syndicate Bank. The same was replicated by numerous financial institutions across the country.

In the present digitisation era, BBPS is beneficial over Pigmy Collection process. BBPS is a product of NPCI and is 100% Indian.

The transactions on the BBPS platform and is fast becoming the de-facto mode for a variety of Billers.  

A number of Banks are also familiar with the BBPS System Architecture and the integration with Rajiv Gandhi Housing Corporation Limited can be done seamlessly.

In fact, Karnataka can take the lead in driving loan recoveries via BBPS. The model if goes LIVE, can be replicated by other State Governments too.

To encourage Loan Borrowers to repay via BBPS without any breaks, a Reward Program can be designed.

This reward program can be a great motivator for the borrowers to pay regularly and minimise defaults.

Motivators: Reward Program for high performers

01) INR51/- cashback for the first loan repayment of the Day. The day starts at 12:01am

02) INR52/- cashback for the last loan repayment of the Day. The day ends at 11:59pm

03) INR53/- cashback to the highest loan re-payer of the Day. EG: One person may pay INR100/-, another personINR300/- another person INR500/- on the same day. So, cashback of INR53/- can be given to the person who has paid INR500/-.

04) INR21/- cashback to persons who have continuously paid for Seven Days. The payment can be little as INR25/- on a single day.

05) INR101/- cashback to persons who have continuously paid for Fifteen Days. The payment can be little as INR25/- on a single day.

06) The Cashback awards to be announced every working day by 11.00am. This will build up the excitement.

07) Brief details of the daily award winners can be highlighted in the social media pages of the respective departments. This will build up the excitement to repay every day, whatever small amount it may be.

08) The cashback amounts can be reset as per public demand.   

 

Loan Collections via BBPS is very simple and can be done by the Loan Borrower/immediate family without much effort.

A)     Rajiv Gandhi Housing Corporation Limited onboards BBPS as a biller.

B)     RGRHCL Loan Recovery Module is linked to BBPS. The module should be capable of real-time data capture.

C)     Online Repayment – Net Banking/Mobile Banking/eWallets/Apps like PhonePe, Paytm, Google Pay, NPCI-BHIM etc.  The Loan Borrowers log into any BBPS App and initiate the loan repayment.

D)    Offline Repayment – i.e Cash. The Loan Borrowers walk into any BBPS Physical Counter and repay the loan amount via Cash Deposit.  

 

 

Quote:

Poor can pay home loans via pigmy collectors

The state government, which claims it to be the first such initiative in the country, is expected to launch it by the first week of September.

 

The Department of Housing is soon introducing a novel way for the poor, who have bought affordable flats in the government constructed apartments, to pay home loans easily. Instead of paying equated monthly instalments (EMIs), they can opt to pay small amounts every day through pigmy collectors.

 

The state government, which claims it to be the first such initiative in the country, is expected to launch it by the first week of September. Over one lakh flats are under construction now, of which 50,000 are in BBMP limits. Under the housing scheme for economically weaker sections, a one-BHK house would cost Rs 10.56 lakh, of which the state and central governments give a subsidy of Rs 2.71 lakh for general and Rs 3.50 lakh for SC/ST beneficiaries.

 

The government has selected close to 86,000 beneficiaries. Two BHK costs Rs 15 lakh and will be allotted through auction. Payment options for 2BHK will be initiated later. Rajiv Gandhi Housing Corporation Ltd chairman Ram Prasath Manohar said the novel initiative is the brainchild of Housing Minister V Somanna. Most of the beneficiaries are daily wage workers, who may find it difficult to pay EMIs.

 

“That’s why we are introducing the pigmy system, where one can pay every day Rs 50-100 to the authorised pigmy collector. We will draw pigmy collectors from banks, and each collector will be given 100 beneficiaries and a hand-held device. They will go to the doorsteps of beneficiaries, collect the amount and enter the amount on the machine on the spot. Immediately, an SMS alert will be sent to the beneficiary,’’ he said. The housing project is expected to be completed by 2022.

Unquote

National Electronic Funds Transfer (NEFT) - Acceptance of NEFT inward for credit to Loan Accounts

Reserve Bank of India, vide Notification No.RBI/2011-2012/496, DPSS (CO) EPPD No.1894/04.03.01/2011-12, has advised all Banks to accept Loan Credits via NEFT also.

This advisory was necessitated as RBI had received some complaints from customers regarding non-acceptance of NEFT for credit to loan accounts, which was causing inconvenience to the Loan Customers.

As the Banks were willingly taking ECS (Dr) as one of the modes for the repayment and NEFT also being an electronic transfer mode, Banks have been advised to allow the customers to choose NEFT also as one of the electronic modes of making payment towards loan EMIs / repayments etc.

5 reasons as to why do Banks not prefer NEFT Credits to Loan Accounts?

1. Loan Accounts are not part of the Core Banking System, hence, real-time verification of Loan Account Number and customers' name is delayed.

2. Customers might pre-pay the Loan which might not be preferred by Bankers.

3. The actual credit to Loan Accounts might take 2/3 days, in between if the ECS transaction is generated and sent to the Destination Bank, the customers account in the other bank might be debited twice for the same installment. This leads to subsequent customer complaints at a later date.

4. Customers might remit a lesser amount than the Monthly Installment amount, leading to overdue interest being charged in the Loan Accounts. If this is not properly communicated to the Loan customer, there are high chances of customer complaints.

5. If there are multiple credits in a single month, the EMI (Equated Monthly Calculation), will be lopsided, with no clarity.

7 tips to ensure that your NEFT credits to your Loan Account are hassle-free: -

a) Activate your Loan Account in the net banking module.

b) Add the Loan Account as a Payee in your net banking module, funds remitting bank account.

100. Do a test transfer of say Rs10/- and verify the credit in your Loan Account.

d) This will also enable you to know the Lead time between the actual NEFT transfer and the actual Loan Account, which will be useful when transferring the actual payment

e) Once the amount is transferred, inform the details to the customer service email id of the Loan Bank.

f) Verify the credit in your loan account after couple of days.

g) In case of any doubt, immediately mail/lodge query with the respective Loan Bank.

107+ Banks are on NEFT platform, with 2,16+crs transactions being put through the same.

Well, apart from Banks, there are other financial institutions which disburse Loans and collect the repayments through ECS(DR). Trust NEFT credits to such Loan Accounts will also be enabled soon.