If the Reserve Bank of India, RBI, has its way, borrowers harassed by recovery agents can soon heave a sigh of relief.
For, after a spate of events that led to borrowers resorting to suicide to avoid harassment at the hands of recovery agents, the banking regulator in India, the RBI, has asked banks employing recovery agents to fine tune their recovery processes.
The recovery agents of the banks have been using muscle power to recover dues from customers defaulting on their car, home, personal loans and credit card dues. Taking note of media reports on the high handed action of these recovery agents, RBI has come out with a draft proposal on the guidelines for the appointment of the recovery agents by the banks.
The guidelines relate to appointment and engagement of recovery agents, training them on soft collection techniques and methods that they should follow during the recovery of dues from borrowers.
Engagement of recovery agents
The apex bank has said that banks should have a due diligence process in place for the engagement of recovery agents.
~ The banks should inform the borrowers the details of recovery agents engaged for the purpose, while forwarding default cases to these agents.
~ The details should include their telephone numbers.
~ The recovery agents should call the borrowers only from telephone numbers notified to the borrower.
The draft proposal also states that each bank should have a mechanism whereby the borrowers' grievances with regard to the recovery process can be addressed. The details of the mechanism should also be furnished to the borrower while advising the details of the recovery agent.
Training for recovery agents
The proposed guidelines states that banks should ensure that the recovery agents are properly trained to handle with care and sensitivity, their responsibilities, in particular aspects like hours of calling and privacy of customer information.
RBI has requested the Indian Banks' Association (IBA) to formulate, in consultation with Indian Institute of Banking and Finance (IIBF), a certificate course for direct sales agents, direct marketing agents and recovery agents with minimum 100 hours of training.
Once the above course is introduced by IIBF, banks should ensure that over a period of one year all their recovery agents should undergo the above training and obtain the certificate from IIBF. Further, the service providers engaged by banks should also employ only such personnel who have undergone the above training and obtained the certificate from the IIBF, the draft proposal says.
Methods followed by recovery agents
RBI said that some banks set very stiff recovery targets or offer high incentives to recovery agents. These have, in turn, induced the recovery agents to use intimidating and questionable methods for recovery of dues.
Banks are, therefore, advised to ensure that the contracts with the recovery agents do not induce adoption of uncivilised, unlawful and questionable behaviour or recovery process.
With regard to credit card operations, banks are advised that in the matter of recovery of loans, the lenders should not resort to undue harassment -- persistently bothering the borrowers at odd hours and use of muscle power for recovery of loans.
The banks should ensure that agents engaged by them for debt collection refrain from action/s that could damage the integrity and reputation of the bank.
"The recovery agents employed by banks should not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts, including acts intended to humiliate publicly or intrude into the privacy of borrowers' or credit card holders' family members, referees and friends, making threatening and anonymous calls or making false and misleading representations."
RBI has realised that there has been a rise in the number of litigations against banks and adverse publicity in the recent past for engaging recovery agents. The consequent implications not only harm the reputation of the bank concerned but also the banking sector as a whole. This has necessitated a review of the policy, practice and procedure involved in engagement of recovery agents by banks in India.
The apex bank has asked the customers to send their feedback within one month. So what's stopping you? Go ahead; shoot your complaints or feedback on the proposal announced by the RBI.