How my bubble burst

His last move was in 2007 when he joined a large, high-profile non-banking finance company (NBFC) with a national footprint. It seemed like the right move, at least, initially.

But the good times did not last. The cracks started appearing in early 2008, when the number of borrowers defaulting on their payments began to rise. Still, the Mumbai-headquartered company chose to look the other way, till the deteriorating economic scenario forced it to stop disbursing new loans. Towards the end of September, the company started asking people to resign.

Here is a first person account of how a buzzing office, where the business never seemed to slow, became empty and desolate, its computer terminals resembling tombstones.

(The young executive narrated his story on condition that neither his name nor that of the company for which he worked would be used.)

* June 2007

One day one of my former colleagues, who was then working with a big NBFC, called me. His employers were looking for a sales manager to handle their small and medium enterprises (SME) loan portfolio. The job presented an opportunity to move my career on to the fast track—the company is known to be an aggressive player. I was dressed in Saturday casuals and wasn’t even carrying my CV, but my former colleague insisted that I drop by anyway.

It was quite a small office swarming with direct sales agents (DSAs). There was no place to sit, but my ex-colleague found me a spot on a sofa in one corner of the reception area. My first interview took just 10 minutes.

I was told that my key responsibilities would include appointing DSAs, training them and generating business. We also discussed other key issues such as the internal rate of return (IRR) in the business, fee income and the cost of acquisition.

One day later, I got a call from the head of the firm’s SME business; a 10-minute phone interview followed and even on the phone I could sense his aggressive approach. He agreed to all my terms and offered me the job, provided I joined the firm within a week. My salary rose by 35%. Including other benefits, the total pay hike was close to 60%. Not bad, I thought at the time.

From Day 1, expectations from me were very high. My targets for July, August and September were decided on my first day at the new job, and they were, as expected, very aggressive.

* July, August and September 2007

It was like a dream. Every month, we exceeded our target by at least 30%. We worked till midnight almost every day, but it was exciting and great fun. The construction equipment and commercial vehicle finance divisions, in particular, were doing extremely well and far ahead of our business. The personal loan division was also giving us good contest. However, the mortgage (home loan and loan against property) and auto loan divisions were not doing as well.

* October 2007

There was no semi-annual appraisal for me as I had not been with the firm from the beginning of the year. But those who had been, got a good hike. I was told that if I performed well, I would get a handsome bonus. The terms on which we were appraised were business volume, returns and defaults.

* October, November and December 2007

Things started to slow slightly. But?it?was a happy time for me as I became?a?father. I?realized?I?would have to be more responsible.

* January 2008

We moved into a new office. It was a huge 25,000 sq. ft space and I got a cozy corner, with an independent work station. There were around 400 workstations and a large meeting room, complete with all modern facilities, as well as a training room. Also part of our new office was a large cafeteria, which overlooked a lush green field. I started working harder, as my aim was to get a good bonus. I could not afford to lose the excellent rating which I had. Money motivates.

It was around this time that instances of cheques bouncing started. The collection department had to work harder. So far they had had a cushy time as the going was smooth. Strangely, high-value loans started defaulting first. One such loan was a big confectionery firm in east India.

The collection managers looking after personal and auto loans were also under pressure. They were trying hard, but only a few borrowers made payments and the rest told us they could not pay, as their businesses were not in good shape.

* February 2008

The situation became worse. We were all really scared. We didn’t hav e any mechanism to track the end-use of funds. I was quite sure that part of our loans were being diverted into the stock market. Our borrowers were periodically booking profits and making payments and as long as the money was coming in, we did not bother about how it was being used. With the Sensex rising to its lifetime high, people became greedy and the subsequent fall in the Sensex created big problems. We found out that the customers delinquent on our books were also defaulting to other private financiers. It was shocking—all the customers turning delinquent had unsecured exposure to all sorts of financiers.

My boss told me that I did not need to bother about delinquency as that was not my job. The credit appraisal process was a mere formality, although we always had a formal business discussion with the customers.

* April 2008

Time for our reward and a time to par ty. Our new deputy CEO visited all the metros to celebrate our achievement. We had achieved Rs7,000 crore worth of business in less than a year. I was given a good bonus and was happy. The next year’s budget was Rs10,000 crore business for all products—mortgage, auto, personal loans, loans for construction equipment, commercial vehicles and SME. And the focus was on secured funding.

* April, May and June 2008

It was a time of slow growth and business volumes were coming down. The rate of interest was rising and we cut payouts to our DSAs by reducing the cost of acquisition to 1%.

I could sense that difficult times were ahead. Only those customers who were desperate for funds would come to us. With the cut in the DSA payout, we also became the least preferred financier for the sales agents. By the time any loan proposal came to us, the customer was already over-leveraged. So, the growth in loan approvals started dropping. And the delinquency rate was shooting up sharply to 8-9%.

* July, August and September 2008

There was no improvement in the volume of business or delinquency. Our silk and rice exporter finance portfolios were badly hit. Overall, the half-year business growth was bad.

I was quite scared. The cost of living was increasing every day. The inflation rate was close to 13%. In mid-September, when the crisis had exploded worldwide, we started reading every news report we could find to try and understand what was going on. The uncertainties in office also made me keenly follow the global financial crisis—I tracked every rate cut by international central banks and every stimulus package by various governments. I was desperately trying to get to the root of the problem and the possible solutions. Every rate cut and stimulus package brought hopes that did not last.

* 4 October 2008

We stopped loan disbursements completely. The message from the top management was: ignore that short-term blip, we will restart soon. The cost of funds was extremely high then. All the other financial institutions also had either entirely stopped or were doing very little business.

Every day I would go to the office, but there would be no work. The previous six months had been slow, but there was always something to keep us occupied.

Every day we would hear rumours that the company might cut budgets and there could be retrenchment.

* 8 October 2008

Around 200 sales people, outsourced from a sister concern, were asked to go. That was a clear signal. I started looking for jobs. I uploaded my CV on all the major job portals. There were no responses. Tension was mounting. All my friends advised me not to move to a new place, but to just stay put at my current firm.

My friends working with other NBFCs started losing jobs and a few of them managed to find new placements after taking huge pay cuts. I couldn’t afford that. I had a baby at home and my wife was not working now. I had fixed liabilities for my car and house rent.

* November 2008

This was the ugliest month of my life. Some of my colleagues were asked to move to the collection department. A few of them resisted the move initially, but they had no choice. The message from HR was firm: either go to collection or move out. From sales managers, they turned into collection managers overnight.

In the second week, many more people were asked to resign. They were offered three months salary. One day I found the chair next to me empty. The poor guy had been transferred to the loan against property division only last month. We had had a small party a few days ago to celebrate his joining the team.

I escaped this time, but how long? I could not sleep at night. I was shouting and fighting with my wife for no apparent reason. I was constantly irritated and on edge. It got so bad that I had to consult a doctor who prescribed tranquillizers for a month.

My salary had also reduced because part of it was incentives that were linked to performance. I had minimal savings. Almost half of my take-home salary went towards my house rent and the equated monthly installment, or EMI, for my car. By then, we had to let our child’s nanny go. That saved us around Rs4,000 per month.

In the third week, 50 more guys at the office were asked to leave. One of my colleagues, who had taken a transfer to the western region hardly three months ago, was given two options: Resign immediately and get three months salary or remain on the payroll till you find another job, but for no longer than three months. The credit manager faced the same fate.

That left only me in my department. The office was deathly quiet. I almost felt like a patient in the intensive care unit, with all the support systems gradually being taken away. I started finding it difficult to breathe. I started spending long hours on the Internet looking for a job. I was sending my CV everywhere but did not get a single call.

My father, a retired university professor, was more worried than I was. He, in fact, was never comfortable with my choice of profession as in his scheme of things, teaching and government jobs are the most respectable professions. His focus has been on job security all along. He is not one who would like his son to be in the private sector.

To be fair to him, he did offer his support in my time of need. He advised me to surrender my apartment and stay with him if the situation got any worse and I lost my job. My wife was not exactly excited with that idea though. She had resigned from her steady government job as we felt the new mother should be at home after the arrival of the baby. I did not regret encouraging her to leave her job, but at times I felt I should not have pushed her to quit. A working wife would have been an added support in this hour of crisis. I had enough savings for three months, but no longer.

* December 2008

More bad news. Silk and rice exporters started defaulting in a major way. The delinquency level for SME financing reached 14% and for the overall portfolio almost 4% in eastern India, the worst among all regions.

I got my first interview call from a brokerage, but it was the worst performance I have ever given at any interview in my life. I was depressed and my self-confidence had been eroded. In my empty office, rumours started doing the rounds about many of our offices being shut down.

Then, suddenly, there was a ray of hope, as I heard that the company would restart operations selectively. The focus would be on the quality of business and not its volume. I was the only sales manager at the SME segment. Would they consider keeping me?

I got back in touch with the DSAs. Who knows, I might need them.

One day, in the second week of December, when I came back to office after visiting some DSAs and discussing the new model of business that I planned to do when we restarted operations, I saw our HR manager sitting next to my workstation.

We quietly had tea together and then he put his arm around me to say the two words I had feared to hear all along: Please resign.

(All is not lost. Seventy-two hours after I was fired, I got a job at a foreign bank. And, the best part—I was given a 10% hike.)

* January 1

Initially, I thought my wife and I would celebrate my new lease of professional life. In fact, I was planning to book a table for a New Year’s Eve dinner for couples at one of the five-star hotels. I could now afford it! But I finally decided in favour of a quiet family get-together at home with my parents and a few close relations who stood by me during the past couple of months and encouraged me to fight. I realized the importance of a support system and decided to celebrate that. It would have been very difficult to fight this battle alone. My father was very happy to usher in the new year holding his year-old grandson‘s hand.

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