NEWS & ADVICE : PERSONAL LOAN
One month notice to defaulters before recovery agents take over
By Neelima Shankar
Nov 28, 2007
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New Delhi: In an effort to curb the widespread concern, dissent and complaints regarding the loan recovery methods and excesses of the recovery agents, bankers have now decided to remind the defaulters to clear the dues. Under this decision, the banks will now send a notice of one month to the defaulters to clear their dues, failing which the matter will be handed over to recovery agents.

The bankers have been at the receiving end especially during the past few months regarding the misadventures of their recovery agents. The high handed manner, in which the recovery agents perform their duties have irked various regulatory agencies, consumer courts, Finance Ministry, welfare bodies and legal authorities. Earlier the finance ministry had asked banks to avoid strong arm tactics.

The Reserve Bank of India was so much disturbed that it threatened to bring in a legislation if the banks continue with such practices and ban the recovery agents. The Indian Banker's Association (IBA) also stressed the need of proper training and self regulation, when it comes to loan recovery agents and methods adopted by them..

Various methods like provision of fast track courts to tackle the issues regarding loan recovery disputes have been mooted by the IBA to perform the mammoth task of loan recovery in a more rational way, acceptable to all. This provision of a one month notice by the banks is also a step in this direction. Aditya Puri, MD and CEO HDFC Bank said, “We have, in consultation with the Banking Codes and Standards Board of India (BCSBI), decided to send a letter to a defaulter giving him/her enough time to clear the dues. If the customer reverts to us we would give the individual necessary credit counseling. However, if the customer does not show up within the specified time frame we would hand over the case to the recovery agent as informed to the customer.’’

Small ticket personal loans is the area, which has witnessed major defaults and a large number of excesses by loan recovery agents have occurred with borrowers belonging to this segment. ICICI Bank, which is incidentally one of the most penalized bank by consumer courts and legal authorities for loan recovery misadventures, is also one of the biggest lenders to this segment. Finding the situation difficult and to prevent any further damage, ICICI Bank had decided not to lend any further to sub-prime small ticket personal loan segment. Other major players like HDFC and CitiBank have also decided to screen the borrowers more thoroughly before lending to this segment.


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