RBI Bans Loan Recovery Agents From Harassing Borrowers; No Recovery Calls At Odd Hours Allowed
The RBI has said that companies need to strictly ensure that they or their agents do not harass or intimidate any person in their debt collection efforts.
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Limited calling hours
The central bank’s order is an effort to curb harsh recovery methods taken by lenders through their recovery agents.
It has further limited the hours for calling borrowers on phone for recovery of overdue loans between 8 am and 7 pm.
The RBI said that it has observed that the agents employed by regulated entities (REs) have been deviating from the existing instructions regarding the outsourcing of financial services.
It has from time to time advised REs that the final responsibility for their outsourced activities rests with them and are therefore responsible for the actions of their service providers, including recovery agents.
Forbidden acts
In its latest circular it has made clear that REs have to strictly ensure that they or their agents do not resort to intimidation or harassment either verbal or physical, against any person in their debt collection efforts.
It also includes acts intended to humiliate publicly or intrude upon the privacy of the debtors’ family members or friends.
They may also not send inappropriate messages either on mobile or through social media, make threatening and/ or anonymous calls, persistently call the borrower or call them before 8:00 am and after 7:00 pm for recovery of overdue loans.
Who it applies to
The circular applies to:
- All commercial banks (including local area banks, regional rural banks, and small finance banks) excluding payments banks
- All all-India financial institutions (viz. Exim Bank, NABARD, NHB, SIDBI, and NaBFID)
- All non-banking financial companies including housing finance companies
- All primary (urban) co-operative banks
- State co-operative banks
- District central co-operative banks
- All asset reconstruction companies
Action following complaints
The RBI has taken the step of extending the scope of existing guidelines after receiving complaints of customers being contacted by recovery agents at odd hours, using foul language, etc.
It has found that certain recovery agents are employing harsh recovery methods without the lender having adequate checks and controls over their actions.
Such actions are unacceptable and pose reputational risk for the financial entities themselves.
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