The Hindu Business Line : IBA to enforce fair practice code for debt recovery

Mumbai, Oct. 24 Banks are trying to ensure that their debt collection agents strictly follow the code of conduct to guard themselves from the situation in which ICICI Bank landed recently.

ICICI Bank had to pay up Rs 15 lakh to the kin of a borrower who had committed suicide allegedly following harassment by the bank’s collection agents.

Indian Banks Association (IBA) is taking a re-look at its model policy on collection of dues and repossession of securities and how to make collection agents follow them strictly.

Although IBA has a model policy on recovery of dues, all banks are not strictly following this, said an officer with a public sector bank.

IBA has convened a meeting of bankers tomorrow to discuss the issue of appointment of recovery agents and the method being resorted by them in collecting dues.

“None of us would like to face a situation such as the one ICICI Bank had to confront with, it is not a question of paying up a sum, it is the bank’s reputation that is at stake,” said a bank official who would not like to be named.

Mostly foreign and private sector banks, which are aggressive in retail lending, appoint recovery agents. Public sector banks, generally, have their own branch level recovery officers to collect dues and rarely employ outside agents.

The IBA Model policy states that: “While written communications, telephonic reminders or visits by the bank’s representatives to the borrowers place or residence will be used as loan follow up measures, the bank will not initiate any legal or other recovery measures including repossession of the security without giving due notice in writing. Bank will follow all such procedures as required …..”

But there are instances where outside collection agents of banks resort to unfair methods such as intimidation, physical assaults and repossession of assets without adequate notice.

The Reserve Bank of India, in its fair practice code banks for collection of credit cards dues has stated that “in regard to appointment of third party agencies for debt collection, it is essential that such agents refrain from action that could damage the integrity and reputation of the bank and that they observe strict customer confidentiality.

“Banks and their agents should not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts, including acts intended to humiliate publicly or intrude the privacy of the credit card holders’ family members, referees and friends, making threatening and anonymous calls or making false and misleading representations,” states the RBI guidelines.