Non banking finance companies (NBFCs) may soon have to implement stringent norms on repossession of vehicles in the case of loan default.
The Finance Industry Development Council (FIDC), a self regulatory organisation for asset-financing NBFCs, has come up with a referral directive on repossession of vehicles, which stresses the need to engage agents only after they have undergone a minimum 100 hours of training. The move is to bring in a proper system for repossession.
The council has stressed rules similar to the know your customer (KYC) norms for financial institutions must be followed while engaging agents for repossession. At present, there are no norms for agents. “By doing this there would be accountability which is lacking today,” Raman Aggarwal, co-chairman, FIDC said.
The council has also sent a note to the Reserve Bank of India on the recommendations.
FIDC has said NBFCs must go in for repossession only after the defaulting borrower has been informed. A couple of notices must be sent to the borrower, one of which must mention the intent clearly. However, the council has maintained that repossession is key and acts as a deterrent. Repossession agents focus only on tracing and repossessing the asset. Aggarwal said until the repossession norms are clearly chalked out, lending for automobiles will remain weak.