New Delhi: Finally the banks have woken up, thanks to some hard talking by RBI on the irregularities in loan recovery mechanism. State Bank of India (SBI) , the largest public sector bank has taken a step towards making the loan recovery process smooth and accountable. It is going to hire about 3000 loan recovery officers.

The officers will also handle the responsibility of marketing the bank's products, conduct surveys, file applications, participate in the verification process in addition to recover loans in a 'soft' manner. These officials will get a compensation of around Rs. 2 lakhs per annum.

While announcing the monetary policy review, RBI made it very clear that it won't hesitate in banning the recovery agents if they indulge in abusive practices to recover loan. "RBI's concern is justified as no society would allow recovery agents to take law in their hands for recovering money. A licensing system could be started to identify good agents and responsibility to recovery dues could be given only to licensed agents," said Deepak Parekh, Chairman HDFC Bank.

Recent suicides and harassment complaints by borrowers at the hand of 'goonda elements' garbed as recovery agents received a lot of criticism from widespread sections of the society. Taking serious note of the situation RBI has formulated guidelines on the way loan recovery agents are employed, how they should interact and their extensive background and behavioral checks.

Y V Reddy, Governor RBI said, "Banks that give loans, no doubt have a right to recover them but when they use less than proper means we become responsible for the system as a whole to ensure such abusive practices are prevented. This invites serious supervisory disapproval, which includes imposing temporary or permanent ban if such practices persisted... I am hopeful our threat would work."

SBI Chairman and MD, O P Bhatt, left with little options after the tough stand by RBI, said," Such practices should not be allowed in the civil society and the apex bank has decided to nip it in the bud."