Now loan recovery agents can’t bully you anymore

The Reserve Bank of India (RBI) has been receiving complaints from borrowers regarding threatening tactics being used by recovery agents hired by banks. In view of this the apex bank recently issued guidelines for banks which have been published on the website of the apex bank. It is expected norms formulated for banks will bring relief to borrowers facing harassment from recovery agents.

It’s ok the norms have been formulated but do people know how they will be benefited with these norms. VN Kulkarni, head, debt counseling, Abhay Debt Counseling Centre explains, “The borrowers can now pinpoint the duties of a recovery agent; he/she can object if the agents fail to work within the framework given to them. If the borrower is a defaulter, he has to pay the money borrowed, no doubt, but the agents too cannot take law into their own hands.”

Poorvi Chothani of law firm Law Quest International, also explains that, “The borrowers need to know that now the bank cannot forward a case to its recovery agent if the borrower has lodged a complaint or grievance proceeding.”

As indicated by the guidelines, the recovery agent cannot step in unless such a complaint has been finally disposed of or the bank is convinced, with relevant proof, that the borrower’s claim is frivolous. In case, the case has been referred to the recovery agency, the banks are required to furnish the details of the recovery agencies to the borrower. Also, the banks with the borrower’s consent ensures should have a process of recording text/calls to ensure that no harsh or threatening calls are made by the recovery agents to the borrowers.

She further added that the guidelines authorize the borrower to raise his/her voice if the recovery agents cross the line. One needn’t put up with recovery agents using abusive language, making calls at residence at odd hours, creating a scene before neighbors and so on.

Ms Chothani explains, in any case the recovery agent land up at your doorstep, you must verify their credentials before entertaining them. You must examine their identity cards and note down their names and time of visit, as this would help you take up the matter with your bank. She adds, “In addition, the banks are now required to ensure that the recovery agencies hired by them carry out verification of the antecedents of their employees, which may include pre-employment police verification. This will deter the agents and/or agencies from employing persons with questionable police records.”

Now it becomes banks foremost responsibility for the actions of their agents, which mean the responsibility of ensuring that guidelines are followed rests with the banks; thus, you can intimate the bank about any harassment faced. Even RBI can be informed about any high-handed behavior.

“A borrower should be aware of his/her rights. They need to educate themselves by going through the model codes adopted by the banks. Almost all banks have adopted the code of Bank Commitments to Customers prepared by the Banking Codes and Standards Board of India (BCSBI). Copies of the same are available at branch offices of banks on demand,” advises Mr Kulkarni.

Besides getting threatening calls from recovery agents, the other aspect which adds to the worries of the borrowers is the possession of their property by the bank to recover its dues. “Generally all loan documents give unfettered rights to banks for recovery of their dues.

The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) has given extensive powers to the banks to take possession of property after following the Act’s guidelines. For example, the bank has to serve a 60 days’ notice and if the borrower does not make the repayment, the bank can take possession of property and auction the same for recovery of its dues. There is no need to mention this clause in loan agreement, as it is a right given to banks by an Act of Parliament. The borrower needs to be aware of this,” cautions Mr Kulkarni.

Therefore, the borrower must study various clauses thoroughly concerning repossession — if such a clause has been added in the loan agreement. The banks, from their side also make sure to bring such a clause to the loanee’s notice at the time of signing the agreement as also ensure that the repossession is legally valid and complies with the provisions of the Indian Contract Act.

The guidelines make it compulsory for the banks to clearly mention the notice period before taking possession, circumstances due to which the notice period can be waived, the procedure for taking possession of the security, a provision regarding final chance to be given to the borrower for repayment of loan before the sale/auction of the property, and the procedure for giving repossession to the borrower as well as sale/auction of the property.