Loan Recovery Agents Banned From Using Bad Language, Threats To Recover Loans: This Won’t Be Tolerated By RBI

In the Modern BFSI Summit 2022, Reserve Bank of India (RBI) Governor Shaktikanta Das disapproved of the harsh behaviour of loan recovery agents of banks with customers/borrowers and made clear that the central bank would not stand in favour of it.

At the same time, the Governor also made clear that it is not on the same lines of existing banks launching digital-only banks, as it carries some risk parameters, so RBI has chosen to not accept suggestions on such arrangements, as per reports.

RBI Gov Condemns Loan Sharks’ Aggressive Behavior of Loan Recovery

In his address at the Modern BFSI Summit 2022, RBI Governor said on Friday that it would not tolerate harassing customers for loan recovery by agents of the banks.

Using harsh methods like calling loan defaulters regularly and using rough language to get the money back by bank agents, among other things, shall not be entertained by the RBI, Das clarified.

While it is mandatory for loan borrowers to return the amount and the banks have a right to get the money back, Das pointed out that such defaulters shouldn’t be ‘troubled’ by bank agents via unconventional ways.

RBI Not in Favour of Digital Banks

“We don’t have a separate regulatory framework for what is called a digital bank.

I feel there is no need for any bank to set up a separate digital bank, to have a sort of parallel entity in the same business. What they can achieve by having a parallel entity they can very well achieve as a part of their own organisation.

 There were some suggestions which came, but we felt that it carries certain risks with it. So we have not accepted that at the moment,” said Das while speaking at the Modern BFSI Summit 2022, organized by financialexpress.com.

RBI Concerned Over BigTech’s Entry in Loan Processes

Companies like Google, Amazon, Meta and Apple Inc are considered to be Big Tech companies.

Big Tech’s play in lending activities using customer data and sophisticated algorithms can lead to systemic concerns like over-leverage and inadequate quality assessment of borrowers, believes RBI.

Their entry also poses risks related to data sharing, data protection, increasing competition and operational resilience, among other things.