The Hindu Business Line : Debt recovery

This refers to the news item “IBA to enforce fair practice code for debt recovery” (Business Line, October 25). There should definitely be a moral code of conduct for debt recovery but it should not sound as if it is soft on wilful defaulters. As it is, the repayment culture is not very good in India.

The laws are also heavily loaded in favour of the defaulters. There are very few borrowers who pay up on their own.

Many expect the lenders, especially institutional lenders, to call and tell them that their repayments are due. But the local lenders still use the pressure tactics to recover their dues and they are certainly more successful.

The borrowers fear them and are prompt in repaying their dues first.

The official rules, stipulations, guidelines and circuitous laws have put banks on a weak wicket. By the time they go through these procedures, the defaulter often makes good his escape. This is not a desirable situation.

On the contrary, the law should send a clear message that they will be punished severely.

Unfortunately, the recent sympathy wave in favour of defaulters on the pretext of ‘harassment’ is sending wrong signals.

While a strict code of conduct for recovery of dues by lenders is a must, the law should also stipulate that defaulting on loans without sufficient reason, and without the lender being informed and convinced, is a crime, ab initio.

Only then will repayment compliance improve and there would be healthy two-way flow of funds from the lenders to the needy borrowers.

Hari Madhu e-mail

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