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In
September 2007, Prakash Sarvankar, a customer of India's second
largest bank, ICICI Bank, committed suicide after being publicly
humiliated by the bank's loan recovery agents. ICICI Bank was
compelled to pay Rs. 1 million in the form of a fixed deposit as
compensation to the victim's family. In a similar incident,
another customer Yadaiah from Hyderabad died of a cardiac arrest
after the recovery agents forcibly tried to recover a personal
loan of Rs. 15,000 from him. ICICI Bank ended up paying a
compensation of Rs. 0.3 million to the victim's family.
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In November 2007, the Delhi State Consumer Dispute
Redressal Commission fined ICICI Bank Rs. 5.5 million after ICICI Bank's
recovery agents hired goondas1 to recover their loan amounts.2
These were not isolated incidents. There were many other reports of
customers being harassed by recovery agents of other banks and financial
institutions as well. For instance, in September 2007, a manager of
Housing Development Finance Corporation (HDFC) Bank and two of its
recovery agents were arrested for extortion and threatening a customer
for recovery of a loan.
It was alleged that the recovery agents commissioned by banks often
resorted to high-handed tactics such as verbal and physical abuse,
threatening phone calls, and public humiliation of customers to recover
loans. There were also allegations of recovery agents seizing vehicles
of loan defaulters illegally and kidnapping and torturing of defaulters.
These incidents provoked an outcry against banks, with customers, the
public, and policy markers clamoring to put an end to this unethical
practice.
Customers alleged that the growing competition among the banks had
prompted their sales force to hard sell personal and vehicle loans and
other financial products, but the very same banks adopted unethical
methods when it came to recovery of loans in cases of default.
Some commentators felt that such behavior of banks amounted to
deficiency in service and unfair trade practice. Use of goons to recover
loans was a criminal offence, they said.
On the other hand, banks justified the use of external agents for
recovery of loans. According to B Madhivanan (Madhivanan), Head,
Customer Service, ICICI, "When customers give false information like a
wrong address or misleading employment information and when their cheques
bounce, we ask for the help of a collection agency."3
According to Madhivanan, it was not easy for banks to deal with
defaulting borrowers who somewhere down the line stopped repaying their
loans.
"You have to listen to some of the recordings of our telephonic
conversations with loan defaulters. They challenge us to do anything we
want to and threaten us, saying that they are going to lodge false
harassment cases against us,"4 he
added.
However, analysts felt that whatever be the provocation, banks should
abide by the law of the land and not resort to uncivilized behavior to
recover their loans.
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1] Goonda is a Hindi word for goon or muscleman.
2] "Stop Using Muscle Power for Loan Recovery," www.newstrackindia.com, November 7, 2007.
3] "Outgunning the Goons," www.telegraphindia.com, September 24, 2007.
4] "Outgunning the Goons," www.telegraphindia.com,
September 24, 2007. |
