The Hindu Business Line : Loan recovery by force

It is painful to note that despite the Supreme Court judgment that banks cannot use force to recover overdue loans, many banks are adopting the same tactics, often turning a blind eye to strong-arm tactics by hired agents, though the agreement between banks and recovery agents clearly states that the agents should not use force to recover the dues.

Unless the RBI intervenes and imposes heavy penalties, this situation will not improve. The banks go on giving credit to people who are not capable of paying back the loans, charge heavy interest and circumvent the usurious interest rate as service charges and use agents to recover the loans, using legal or other means.

If the central bank is too preoccupied managing monetary, forex and other issues perhaps it can delegate the job of policing the banks to some other agency. The RBI should also address certain other urgent issues:

Banks are supposed to issue passbooks to savings bank account-holders. But many new generation private banks and foreign banks do not do so. Most of these banks levy exorbitant charges for return of cheques, even for non-financial reasons.

Credit card dues are nothing but loans extended without security. For the outstanding amount, banks can only charge normal interest. But, to circumvent the usurious interest rate rules, the banks use the euphemism of service charges, whereby the customers have to pay not only high interest rate but service tax on interest. The Government is, of course, happy to get the service tax on interest. Unless someone knocks at the doors of the courts, such matters may not be settled.

K. Narayanan Hyderabad

More Stories on : Letters | Non-Performing Assets | Consumerism

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