The Hindu Business Line : Recovery of bank dues

Following the passage of “The Payment Settlement System Bill-2007” in Parliament that seeks to regulate and supervise payment system in the country, designating the RBI for the purpose, the central bank has now issued draft guidelines on recovery agents employed by banks.

In the backdrop of the unfortunate and increasing incidence of high-handedness by recovery agents on defaulting borrowers witnessed in the northern India, the RBI is perfectly right in stressing that banks must exercise due diligence while appointing recovery agents and for putting in place an appropriate mechanism to address borrower complaints about the recovery process.

Unlike in the western countries where the lenders’ right is absolute, wholesome and without indulging in insulting practices, we have a piquant situation in India.

The sad reality in India is that banks are meant only for giving loans and not for asking them back.

There is, therefore, a need felt by banks often to remind the borrowers that the dues are to be repaid and, if they are not, the lender has the right to repossess the asset obviously by following legal means.

A fact that cannot be lost sight of here is that a lot depends on the circumstances that the borrowers are faced with when it comes to loan default.

Banks have always been considerate with regard to this vital aspect and been soft in dealing with them and even extending rehabilitation package, wherever necessary, to make them come out of crisis situation and eventually to repay the loans.

The critical issue is to determine whether the borrower is a wilful defaulter or otherwise to decide the course of legal action.

Second, it is not easy to repossess assets even through court process. The inordinate delay involved in the process is another matter.

The government must ensure that banks do not find themselves in a bind and that the cycle of recovery is a continuous process, which is vital to keep the ball rolling.

The high-handedness by recovery agents is surely a serious matter and, to that extent, the introduction of the Bill and guidelines is perfectly justifiable.

Srinivasan Umashankar Nagpur

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