According to leading credit insurers, India is the country with the worst payment morale worldwide. According to Coface, 82 percent, and according to Atradius even 94.7 percent, of the companies surveyed complain about payment delays in India. On average, foreign companies in India wait 43 days longer for money than contractually agreed.
Delay is the rule!
Payment delays and defaults are unfortunately common practice in India. With 2.4 percent of bad debts ultimately having to be written off completely, India is also at the top of this ranking.
Therefore, every export transaction with India should be secured by a bank or a specialized service provider, for example by means of a letter of credit.
Of course, all agreements with the customer should be precise and recorded in writing. In addition, in the case of international payment transactions, both parties must comply with the specifications of the Foreign Exchange Management Act (FEMA) take note.
Due to the recent changes in the Indian insolvency law secured creditors are given priority over other claims. Thus, the creditor can bring the debtor before an insolvency court. However, mediation is always preferable to court action.
Enforcement of payment claims in India
If there are delays in payment, the creditor should react as early as possible by sending a reminder and announcing further legal steps. This can be done via lawyers, Indian debt collection agencies or other service providers. Ultimately, the aim is always to exert pressure on the debtor. You can find a few suggestions on the topic for example here (Keyword: equality of arms, knowledge is power).
Our Indian administrative unit, Dr. Wamser + Batra India Pvt. Ltd., also deals with "dunning procedures" and "debt collection" in its day-to-day business. In doing so, we also work to a large extent on a success-dependent basis. With realization rates of around 90 percent, cooperation pays off for all parties involved.
Our head of department Karsten Echle will be happy to answer any questions you may have on the subject of debt collection and receivables management.