Professional DSAs & Their Tribe Can Increase If The Industry Is Regulated
The,loan,distribution companies in India (popularly known as Direct Sales Agent (DSA)) accurately mirrors the stark contrast that defines India.,One end of the spectrum has large players like Andromeda having multi city presence, employing hundreds and thousands of agents and association with almost all leading banks and on the other end of the spectrum are small and local players as well as individuals. Thus it is a kind of mixed bag of people operating in this industry.
In the absence of entry barriers, new DSA outfits mushroom almost daily with employees of existing DSAs starting their own outfits after gaining experience in the line. The banks were more than happy and willing to work with them as it means bringing more loan seekers into their fold.
In the absence of any regulation / guidelines for DSAs, besides nil entry barriers, today the industry is rife with sharp practices. Customers are facing number of issues right from false promises made by the on-ground sales person to somehow get the file of the customer, to making false commitments in terms of timing of disbursements or even unclear interpretation of terms and conditions.
After all the industry has no quality standards on who can be employed in the industry nor are there any formal training standards or a proper grievance redressal mechanism. The professional DSAs (yes they do exist and what’s more are slowly making a mark for themselves) also face an issue since unlike most of their brethren they do not want to over promise just to somehow get a prospect into their net.
The industry has already grown to a formidable size with an estimated 1 lakh people thought to be directly employed in this industry and it is estimated that DSAs account for double digit percentage of the total retail loan disbursements in the country. Proper regulation will ensure that it grows and remains a vibrant industry that helps spread the reach of the banking industry and also provides gainful employment opportunities to quite a few youngsters.
DSAs whom we spoke to welcomed the idea of regulation though it will add to the cost of their operations but ultimately industry will gain respectability attracting better talent to the industry and increasing business volumes.
Loan customers will also welcome regulatory regime and of course quire centralized grievance redressal mechanism where they can check the credentials of the particular DSA they are going to deal with.
There have been sporadic efforts to bring some order in this chaos. NHB brought out a discussion paper for a certification course in,Home Loan,counseling and providing for compulsory accreditation to a lenders forum that could also act as a grievance redressal mechanism. This does not seem to have elicited any response so far. After all the NHB writ runs only on the housing finance companies which are only a small portion of the overall retail lending business in the country which is dominated by banks and NBFCs.
The larger DSAs have tried to form an industry association themselves a couple of times when specific issues (such as reimbursement of service tax by the lenders in 2004) have reared its head but even these baby steps have not been built on.
Clearly only RBI can ensure that this industry becomes more organized. A good first step could be to make regulations prescribing certain minimum qualification criterion including an entrance test as well as continuous training and upgradation of skills without which lenders should not be allowed to appoint a Direct Selling Agent. A self-regulatory organisation can then be formed for everyone who passes these exams and who will maintain the standards for their members.
It is a fact that the industry has grown to its current size on the sheer entrepreneurial free spirit of Indians, but now it needs some order of semblance and regulation to actually arrive. Possibly the DSAs themselves can try and build a Self Regulatory organization. Apnapaisa would be happy to serve as a platform to get the industry players to start taking steps in this direction. Industry players can write to me on email@example.com sharing their views and concerns on the matter.
I hope that taking cognizance of the scenario discussed above, RBI and NHB will initiate work in this direction in 2011.