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The various incidents involving recovery
agents also attracted the attention of the regulators. In
February 2007, the Supreme Court (SC) of India expressed concern
that the banks were not adhering to the rules framed by the
Reserve Bank of India (RBI) and the Indian Banks Association (IBA).
RBI's guidelines stated that recovery agents could not resort to
"harassment of any kind, either verbal or physical, against any
person in their debt collection efforts, including acts intended
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humiliate publicly or intrude the privacy of the
credit card holders' family members, referees and friends, making
threatening and anonymous calls or making false and misleading
representations."5
But ICICI Bank contended that the RBI guidelines
provided for the employment of agents by commercial banks for recovery
of loans and seizure of vehicles in case of payment defaulting.
In
response, the SC bench emphasized that recovery of loans or seizure of
vehicles could be done only legally, and further that while banks "[had]
the right to recover the loans but [they] cannot send goondas to recover
the vehicle. Sometimes since they get commission, the agents may resort
to force and threat. We will have to stop this practice."6
With RBI's regulations being routinely flouted, in October 2007 the apex
bank expressed concern that the unlawful tactics adopted by banks would
adversely affect the reputation of the banking sector in general.
Subsequently on November 30, 2007, RBI issued fresh guidelines for
banks.
The guidelines provided for mechanisms to be followed by banks for loan
recovery and hiring and training of recovery agents. As per the
guidelines, before forwarding the cases of the defaulting party to
recovery agents, banks had to provide the details of the agents
including telephone numbers to borrowers, and the agents were required
to call defaulters only from those telephone numbers.
Secondly, every bank had to have in place mechanisms to address
complaints of borrowers about harassment by the recovery agents. Banks
were required to reformulate their contracts with recovery agents in
such a way that the latter did not adopt "uncivilized, unlawful and
questionable behaviour or recovery process."7
Verbal or physical harassment of any person, anonymous and threatening
calls, intrusion into the privacy of the defaulter and his or her family
and friends were strictly prohibited by the guidelines. The guidelines
required that recovery agents were adequately trained to deal with
customers, especially with regard to aspects like calling hours,
confidentiality of customer information, and intrusion into their
private space, etc.
In addition to this, the RBI censured banks for offering high incentives
or setting rigid targets for recovery agents, which encouraged agents to
use physical force and indulge in questionable behavior while recovering
loans.
The guidelines also made reference to the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002 (SARFAESI Act) and the Security Interest (Enforcement) Rules,
2002, in the context of loan recovery and possession of property.
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5] "IBA to Deal with Recovery Agent High-handedness," www.apnaloan.com, October 26, 2007.
6] "Banks Can't Hire Goondas for Loan Recovery," www.thehindu.com, February 7, 2007.
7] "RBI Issues Draft Guidelines for Recovery Agents," www.business-standard.com, December 1, 2007. |
