The Hindu Business Line : RBI favours Lok Adalat forum for loan recovery

Draft norms
Special training and certification for recovery agents.
Due diligence must before appointing recovery agents.
Mechanism to hear borrowers’ grievance needed
Customers must be given a notice period before taking possession

Our Bureau

Mumbai, Nov. 30 Banks may no longer be able to resort to strong-arm techniques for loan recovery. The draft guidelines issued by the Reserve Bank of India suggest that banks should use the forum of Lok Adalat for the recovery of personal loans, credit card loans or housing loans of less than Rs 10 lakh.

Recently, some banks have been in the spotlight for alleged harassment of their customers by recovery agents.

In order to have a legal recourse for recovery of loans, Indian Banks’ Association had earlier suggested having special fast track courts on the lines of Lok Adalat. The IBA has set up a working group in order to study the various possibilities for loan recovery.

Countries such as the UK and the US have special fast track courts, which deal with cases pertaining to recovery and repossession.

Certification

The central bank has also suggested special training and certification for recovery agents. The RBI has asked the Indian Banks’ Association to formulate a certificate course with minimum 100 hours of training for direct sales agents, direct marketing agents and recovery agents, in consultation with Indian Institute of Banking and Finance (IIBF).

“Once the above course is introduced by IIBF, banks should ensure that over a period of one year all their recovery agents undergo the above training and obtain the certificate,” said the guidelines.

The RBI also requires banks to conduct due diligence before appointing recovery agents. Banks should provide details of recovery agents, such as telephone numbers to the borrowers and also ensure that recovery agents call borrowers only from those telephone numbers.

Banks should also have a mechanism whereby the borrowers’ grievances can be addressed and should inform the borrower of the same.

In case of loan recovery and possession of property, banks should depend on legal remedies prescribed by the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and the Security Interest (Enforcement) Rules, 2002, said the guidelines.

Banks, which have incorporated re-possession clause in the contract with the borrower, should give their customers a notice period before taking possession and should also inform the procedure they would follow for repossession or for the sale or auction of the property concerned in order to bring adequate transparency.