It’s Uncivilised but still in practice

It seems certain banks have scant regard for the Reserve Bank of India (RBI) guidelines and have not learnt any lessons from the Supreme Court’s orders against employing goons to recover loans.

According to the RBI Guidelines, “In the matter of recovery of loans, the lenders should not resort to undue harassment viz. persistently bothering the borrowers at odd hours, use of muscle power for recovery of loans, etc.”

Maintaining that India is a civilized country governed by the rule of law, barely two months ago the Supreme Court had reminded the banks that they cannot deploy musclemen to recover loans from defaulters often forcing them to commit suicide.

The court’s remarks had come in connection with the suicide of a 34-year-old Himanshu Dev Sharma after being humiliated by ICICI bank’s recovery agents.

Only a week ago, the National Consumer Disputes Redressal Commission noted: “In case of motor vehicle loans…the debtor/borrower is under constant tension that if he fails to pay one or two installments, he would receive threats from so called “recovery agents” of the banks.”

The national consumer court took a dig at the Reserve Bank of India saying: “The RBI has permitted the banks to appoint “recovery agents” on contract, without perhaps fully appreciating the implications that these “recovery agents” are usually musclemen, employing whom increases nothing but goondaism.”

But despite the RBI guidelines and apex court orders, some banks have not ceased the practice of using ‘goons’ in the name of recovery agents leading to frequent incidents of customers being harassed and even beaten up at the hands of such people engaged by banks.

The Reserve Bank of India guidelines permit employing recovery agents but make them responsible for the actions of their agents.

Reiterating the RBI Guidelines on Engagement of Recovery Agents, the court on May 15 said: “The Reserve Bank may consider imposing a ban on a bank from engaging recovery agents in a particular area, either jurisdictional or functional, for a limited period. In case of persistent breach of above guidelines, Reserve Bank may consider extending the period of ban or the area of ban.”