The Reserve Bank of India on Thursday, Feb. 12, issued draft amendment instructions on matters related to engagement of recovery agents for scheduled commercial banks (excluding regional rural banks) and housing finance companies (HFCs), inviting public comments. As per RBI's draft norms, the proposals aim to bring all regulated entities under a single and comprehensive set of rules covering the fair treatment of borrowers, behaviour of lender staff and recovery agents, and a uniform code of conduct for the loan recovery process.
''Upon a review, it has been decided to issue comprehensive instructions to all regulated entities on conduct related matters in recovery of loans and engagement of recovery agents, which inter alia cover aspects such as fair treatment to borrowers during recovery process, conduct of lender's employees and recovery agents, due diligence, training, code of conduct for recovery agents, etc,'' said the central bank in its circular.
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The draft rules pertain to governing banks' engagement of loan recovery systems, mandating training for agents and also recordings of all calls. A bank must ensure that all phone calls made to a borrower by an agent are recorded, the RBI said, stressing that an agent interacts with a borrower in a "civil manner".
The proposed guidelines ask banks to put in place guidelines on the subject, and also ensure that customer information resting with the agents or employees is not misused. "An employee/recovery agent shall interact with the borrower in a civil manner. Further, he / she shall maintain decency and decorum during visits to the borrower's place for collection / recovery of loan dues," the RBI said.
The RBI is also mulling to make it compulsory for the recovery agents to undergo the 'debt recovery training' conducted by the Indian Institute of Banking and Finance (IIBF). The draft follows an announcement to this effect made by Governor Sanjay Malhotra last week while announcing the monetary policy review. In the past, there have been instances including the death of the next of kin of a borrower during a visit by a loan recovery agent in Bihar, which had prompted the RBI to ask lenders to be more sensitive.
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The draft rules specifically mention that the recovery efforts should desist usage of abusive language, sending inappropriate messages. In the draft rules, the central bank also proposed that the loan recovery efforts should not be undertaken at "inappropriate occasions" such as bereavement in the family or such other calamitous occasion, or marriage functions and festivals.
A bank shall also ensure that the recovery agencies engaged by it carry out verification of the antecedents of their representatives / employees at pre-engagement level and subsequently, on an ongoing basis at a pre-defined periodicity. In cases where the subject matter of the borrower's loan dues is subjudice, the bank shall exercise "utmost caution" in referring the matter to its employee or recovery agents, it said.
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