RBI for stiff guidelines on recovery agents of banks

PFW  Bureau / Dec 2

The recovery agents of the banks have used muscle power to recover dues from the defaulting customers of car, home and personal loans and credit card holders.
Taking note of the media reports on the high handed action of these recovery agents, Reserve Bank of India (RBI) has come out with a draft proposal on the guidelines for the appointment of the recovery agents by the banks.

Engagement of Recovery Agents

The apex bank said that the 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 the recovery 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 stated 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 stated that the banks were advised that they 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 undergo the above training and obtain the certificate from the above institute. 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 apex bank said.

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 intimidatory 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 uncivilized, unlawful and questionable behaviour or recovery process.
With regard to Credit Card Operations, banks were 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. “Their agents 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 the borrowers' or credit card holders' family members, referees and friends, making threatening and anonymous calls or making false and misleading representations.
RBI said 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 likely implications for reputation risk not only for the bank concerned but also for the banking sector as a whole has necessitated a review of the policy, practice and procedure involved in engagement of recovery agents by banks in India.
In this backdrop, the Reserve Bank proposes to issue the following operational guidelines for adoption by all commercial banks. A reference to 'agent' in these guidelines would include agencies engaged by the bank and their agents  and employees, as well as the bank's own employees.
The apex bank asked the customers to sent their feedback within one month.

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