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Loan recovery goons may become history
Anita Bhoir in Mumbai
 
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September 12, 2007 08:26 IST
Failed wrestlers and goons are an integral part of the country's sophisticated financial sector. They are used in large numbers to recover dues from customers. Not averse to using some muscle power on the customer, they invariably get the job done.

If the Reserve Bank of India [Get Quote] (RBI) has its way, these tough-talking, muscle-flexing men could soon find themselves without a job.

The RBI is working on a comprehensive set of guidelines that will make banks responsible for ensuring that their recovery agencies do not recruit individuals with a criminal background.

The RBI move follows a sharp rise in complaints from credit-card holders against the recovery methods used by some banks.

Recently, the Supreme Court had also expressed its strong reservations against banks recruiting goons for recovering loan dues.

"The banking ombudsman is flooded with customer complaints with regard to banks' recovery practices. The RBI is looking into the matter. We shall in association with the Banking Codes and Standards Board of India take appropriate action. Banks cannot have criminals engaged in collection activity and harass people," an RBI official told Business Standard.

This does not mean that defaulters will be protected against the banks. "The RBI is not supporting defaulters here. Banks have a right to claim their dues but it has to be done in keeping with the law of the land," said the official.

Banking sources said once the new guidelines were in place, all banks would have to ensure that recovery agencies did a thorough background check of their employees, including police verification.

The proposed RBI guidelines will also require each bank to publish the names of its recovery agencies, including on its website.

"These agents will be authorised to call from registered telephone numbers, which will have to be listed on the bank's website. Collection agents would be barred from making calls from any other number.

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