Union Finance Minister Nirmala Sitharaman on Monday instructed public and private banks to refrain from threatening borrowers during the process of loan recovery and added that they need to deal with the situation in a humane and sensitive manner.
“I have heard complaints about how mercilessly loan repayments have been followed up by some banks. The government has instructed all banks, both public and private, that harsh steps should not be taken when it comes to the process of loan repayment, and they should approach the matter with humanity and sensitivity in mind,” she said while making an intervention during the Question Hour in the Lok Sabha when asked to address a question relating to repayment of loans by small borrowers.
Along similar lines, the Madras High Court had emphasised that outstanding loan amounts were to be recovered in accordance to procedures established by the law. It had added that the recovery of amounts through private agents was prohibited and that banks must not resort to muscle power.
In 2008, the Reserve Bank of India had informed banks that employing recovery agents would be banned should there be any complaints regarding the agents. Banks were also asked to check their recovery mechanism and provide points for improvement in their guidelines.
Several circulars have been issued by the central bank to stop recovery agents from harassing borrowers. In March, RBL Bank Ltd was fined about (Rs 2.27 crore) $280,000 for noncompliance of guidelines for loan recovery agents. Penalties have also been imposed on cooperative banks for infringement of legal directives.
Last year, in August, the RBI had barred recovery agents from threatening borrowers and calling them before 8 am and after 7 pm.
For all the latest business News Click Here
