RBI issues draft guidelines for banks' recovery agents

30 Nov 2007

1

Mumbai: The Reserve Bank of India has asked banks not to set stiff recovery targets or high incentives for its agents, which may induce them to use intimidatory or questionable methods of recovering dues.

In its draft guidelines for appointment of loan recovery agents, the RBI has also asked banks to provide borrowers with the contact details of the agents and train the agents properly with respect to making calls to borrowers.

Banks should also abide by the legal clauses while taking possession of properties mortgaged or hypothecated to them, the RBI said

"In view of rising number of litigations against banks in the recent past for engaging recovery agents, it is felt that adverse publicity could result in serious reputational risk for the banking sector as a whole. An urgent need has, therefore, arisen to review the policy, practice, procedure involved in the engagement of recovery agents by banks in India. Accordingly, banks are urged to follow prescribed specific considerations while engaging recovery agents," RBI said in its draft guidelines.

Complaints received by the Reserve Bank regarding abusive practices followed by a bank''s recovery agents would invite serious supervisory disapproval, it said.

The RBI would consider imposing a temporary ban (or even a permanent ban in case of persistent abusive practices) for engaging recovery agents on those banks where strictures have been passed/penalties have been imposed by a high court/supreme court or against its directors/officers with regard to the abusive practices followed by their recovery agents.


Highlights:

* DSAs/DMAs/recovery agents should get minimum 100 hours of training.

* Recovery agents should call borrowers only from telephone numbers notified to the borrower.

* Each bank should have a mechanism whereby borrowers'' grievances with regard to the recovery process can be addressed.

* Banks advised to ensure that contracts with recovery agents do not
induce adoption of uncivilised, unlawful and questionable behaviour or recovery process.

* Banks required to strictly abide by the codes pertaining to collection of dues.

The central bank said in the guidelines posted on its website for public comments.

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