Zavo has released a new survey revealing that India’s lenders could prevent up to 85 per cent of loan defaults through timely borrower engagement. Despite this, most financial institutions continue to rely on recovery-driven systems that recoup only 15–30 per cent of dues after default.
Covering 2.2 lakh EMI payers across India, the study found that 90–95 per cent of borrowers clear missed EMIs within 90 days when offered structured support, saving lenders nearly Rs 3,200 per case and improving borrower retention rates to 85 per cent. The findings suggest that missed payments often stem from temporary distress rather than willful neglect.
“We can continue treating defaults as moral failures to be punished or start treating them as human crises to be prevented,” said Kundan Shahi, Founder, Zavo.
“By offering need-specific interventions, from temporary restructuring during medical emergencies to cash-flow-aligned repayment plans, institutions can preserve trust while protecting their balance sheets,” he added.
The analysis shows that 34 per cent of all defaults are linked to survival-level crises, with medical emergencies (18 per cent) and job or income loss (16 per cent) emerging as the top triggers. Drawing from Maslow’s hierarchy of needs, the study notes that when safety and survival are threatened, borrowers naturally prioritise essentials such as food, rent, and medicine over EMIs.
Other contributing factors include high interest costs, business setbacks, and family obligations, highlighting that most defaults are the result of short-term liquidity issues rather than systemic credit risk.
The survey also identifies a generational shift in repayment behaviour. While older borrowers are accustomed to structured loan repayments, Gen-Z and first-time credit users often begin with credit cards and buy-now-pay-later products designed around flexibility. Features like minimum-due payments and rollovers have reshaped expectations around credit discipline.
According to Zavo, this evolution calls for adaptive credit frameworks that allow partial payments, flexible schedules, and pre-default rescue programmes, without undermining financial responsibility. The company recommends behavioural monitoring systems to identify distress early, such as delayed payments, rising credit utilisation, or frequent customer-support calls, enabling lenders to take pre-emptive, data-driven action.
With early intervention yielding up to a 4× return on investment, Zavo describes the shift from “punishment to partnership” as both compassionate and commercially inevitable, urging lenders to redesign their credit recovery strategies around empathy, insight, and prevention.
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