Fullerton India Credit Co Ltd, an indirect subsidiary of Singapore-based Temasek Holdings, was among the last financiers still willing to bet on India's sub-prime or unsecured borrowers. According to sources, it is now set to join the ranks of Citi Financial, GE Money, ICICI Bank and others who have bailed out of this market because of losses suffered due to the difficulty in loan recovery. The exit of these lenders has however deprived a big segment of the low-income market, which comprised tiny, independent entrepreneurs.
The root cause of the demise of this business is the misbehaviour of recovery agents which led to a few suicides and attracted enormous bad press. This led to police action against the lenders as well as warnings of stringent penalties by the Reserve Bank of India. Another big setback in the recovery process is the lack of sympathy for lenders from the judiciary as well. Some finance companies had attempted to dispense with uncouth recovery agents and use the judicial route (filing Sec 138 complaints against cheque bouncing); however, this only meant long delays, high legal costs and judges who would not look at the entire repayment but focus on specific bounced cheques. Clearly, this route too was unworkable and created an environment where it was an advantage for borrowers to fudge and default on repayments.
While many exited the business, those like Indiabulls, Bajaj Finance, Shriram City Union Finance and FullertonIndia had attempted to struggle on for a while. When the liquidity crunch began, these large players found themselves squeezed by rising defaults as well as ballooning collection costs, forcing a few to scale down operations.
During FY09, Citi Financial brought down its branch network from 450 to 170 branches, while GE Money reduced its branches from 180 to 80. Earlier in March, FullertonIndia gave pink slips to nearly 3,000 employees (20% of its workforce) and also shut down around 50 branches owing to the liquidity crisis. At that time, the credit company had 800 branches across the country and employed around 14,000 people.
As of March 2009, FullertonIndia had disbursed about Rs5,000 crore and had an asset book of Rs2,500 crore. About 70% of FullertonIndia's lending portfolio constitutes loans to the self-employed segment; the remainder consists of loans to salaried individuals and two-wheeler loans.
FullertonIndia provides financial support to customers through Fullerton India Parivaar and Fullerton India Vyapaar. Fullerton India Parivaar caters to the needs of salaried individuals while Fullerton Vyapaar provides finances to self-employed people in small and basic businesses.
In October 2009, FullertonIndia appointed Ruben de la Mora as its chief executive and managing director, replacing GS Sundararajan. Mr Sundararajan was instrumental in leading a team of professionals at FullertonIndia in building from scratch a network of over 800 branches across 400 towns and cities with over 12,000 employees. — Sucheta Dalal & Yogesh Sapkale