RBI gives flexibility to banks in loan recovery

The Reserve Bank of India (RBI) had been looking recovery methods of loans adopted by the banks very seriously and had come out with draft operational guidelines in which restrictions were put on the banks method adopted and on the recovery agents. Again the RBI has drafted new guidelines for the banks regarding bank recovery agents it may allow banks to continue the loan recovery proceedings if the borrower persistently makes frivolous complaints.

In the second draft guidelines on banks’ recovery agents The Reserve Bank of India (RBI), said, “If a customer has filed a complaint, the bank should not forward the case to recovery agents till it has disposed the complaint. However, in cases where the bank has appropriate proof that the borrower is making frivolous/vexatious complaints, it may continue with the recovery proceedings despite the pending complaint.”

“In cases where the subject matter of the borrower’s dues might be sub-judice, banks should exercise utmost caution, as appropriate, in referring the matter to the recovery agents, depending on the circumstances,” said the RBI.

In its guidelines the regulator has also suggested that banks can use the services of credit counselors if the borrower deserved sympathetic consideration.

The apex bank has asked the Banks that they have to periodically update the list of recovery agents on their website and verify their history. They could insist on police verification, besides additional conditions for repossession of assets.

To meet the training needs of agents across the country, in the revised guidelines the banks have been suggested to tie up with the Indian Institute of Banking and Finance (IIBF) and other institutes and conduct their own courses to ensure that all agents clear the examination conducted by IIBF within a year.