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Banks to face consequence for unacceptable practices of loan recovery agents


In a major relief for bank loan defaulters, the Reserve Bank of India (RBI), taking into account certain recent developments including growing incidences of ‘unacceptable practices’ followed by recovery agents (RAs), has issued additional instructions to regulated entities (REs) by extending the scope of the guidelines and limiting the hours for calling borrowers on phone for recovery of overdue loans. 

These instructions will be applicable to all commercial banks, including regional rural banks, co-operative banks, non-banking financial companies (NBFCs), asset reconstruction companies (ARCs) and All India financial institutions, the RBI said in a circular.

“The RBI has from time to time advised REs that the ultimate responsibility for their outsourced activities vests with them and they are, therefore, responsible for the actions of their service providers including recovery agents [agents],” the regulator said.

“It has been observed that the agents employed by REs have been deviating from the extant instructions governing the outsourcing of financial services. In view of concerns arising from the activities of these agents, it is advised that the REs shall strictly ensure that they or their agents do not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts,” the RBI said. 

“[This is] including acts intended to humiliate publicly or intrude upon the privacy of the debtors’ family members, referees and friends, sending inappropriate messages either on mobile or through social media, making threatening and/ or anonymous calls, persistently calling the borrower and/ or calling the borrower before 8:00 a.m. and after 7:00 p.m. for recovery of overdue loans, making false and misleading representations,” the RBI added.  It said any violation in this regard by REs would be viewed seriously.



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