Monday, November 26, 2007

Bankers search new way to deal with defaulters

The bankers have been searching a way to deal with the defaulters. In response to increasing customer complaints against banks resorting to strong arm tactics to recover loans, bankers have now decided to first send a letter to defaulters, informing them that they have a month’s time to clear dues, before handing the case to a recovery agent.

Aditya Puri, managing director and chief executive officer, HDFC Bank said, “We have, in consultation with the Banking Codes and Standards Board of India (BCSBI), decided to send a letter to a defaulter giving him/her enough time to clear the dues. If the customer reverts to us we would give the individual necessary credit counseling. However, if the customer does not show up within the specified time frame we would hand over the case to the recovery agent as informed to the customer.’’

The Reserve Bank of India, judiciary, governments and public has been getting stricter towards the banks for their debt recovery practices. Due to the strictness the banks and non banking finance companies decided to either scale down or exit the small ticket size personal loans business where the default rates were increasing.

Leading private sector banks like ICICI Bank and HDFC Bank have exited the small ticket size personal loans. Citigroup tightened its lending procedures.

A foreign banker informed, “Recovering loan from the defaulters is become very difficult. The activism against collection is very unfortunate. The regulator and the Indian Banks Association is quite on the issue.’’

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