The Buyt Desk
After instances of gruesome tactics of recovery agents the Reserve Bank of India has tightened the rules of loan recovery. Banks have been directed to ensure that borrowers are not harassed in the name of loan recovery. As a part of the Fair Practices Code RBI told that REs (regulated entities) shall strictly make sure that loan recovery agents don’t resort to harassment or intimidation, either physically or verbally, against any customer while recovering their debt.
RBI Guidelines for Loan Recovery
Banks, cooperative banks, asset reconstruction companies, non-banking financial companies, and housing finance companies must ensure that agents do not resort to unfair means. Public humiliation of borrowers, sending invalid messages via social media or on mobile, and contacting family members or friends will be considered intimidation. The recovery agents would not be allowed to call borrowers at odd hours i.e. before 8 am and after 7 pm for making false representations and loan recovery.
Regulated entities also need to make sure that loan servicing and repayments must be performed straight in their respective bank accounts without using pool accounts or third-party pass-through. Also, the disbursements must be executed in the bank account of the borrower.
The recovery agents can’t charge any fee to the borrower and no payment should be made by the borrower to the recovery agents. According to RBI, any charge due to lending service providers must be paid straight by the regulated entity rather than a borrower. They will also need to provide a cool-off time during which the borrowers can come out from the digital loans by paying the proportionate cost and principal amount without any sort of penalty.
Regulated entities further have to make sure that all loan service-providing companies engaged by them have a nodal grievance redressal officer to handle the concerns associated with digital lending.
RBI New Guidelines for Loan Recovery Agents
RBI has issued new guidelines for loan recovery agents. They are now legally bound by a few guidelines as listed below –
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Borrowers must be informed initially regarding recovery agency details.
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While engaging with agents, banks must follow a diligence procedure. They would be responsible for all concerns filed against their agents.
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The loan recovery agent must have a copy of the notice of the bank and authorization letter when interacting with the defaulter.
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If a concern has been lodged by a customer, banks are prohibited to forward that case to a recovery agency until that problem has been resolved.
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This is invalidated in case the bank is agreed with the evidence that complaints or concerns are pointless.
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It is the bank’s responsibility to make sure that the complaints of borrowers about the loan recovery procedure are properly addressed.
At the bottom line, as per the RBI regulations, all the debt collection processes of banks must be designed around the borrowers’ dignity and respect. Agents have to make all attempts to solve problems in an amicable and peaceful manner avoiding calling at a specific time or place borrower would not be honored. The bank and its representatives must give a priority to the privacy of its customers.
