RBI provides second set of guidelines for Banks using agents for collections

Mumbai: The Reserve Bank of India (RBI) has come out with a second set of draft guidelines that would eventually apply to banks which use recovery agents to collect delinquent payments.

In its definition, the RBI has included agencies employed by the bank as well as its own employees as ''agents''.

The RBI has recommended a due diligence process that should be structured to cover individuals involved in the recovery process, which should comply with its guidelines on outsourcing of financial services. Additionally, it has asked banks to ensure that agents engaged by them in the recovery process periodically carry out a verification of the antecedents of their employees, which may include through police verification.

In its measures to bring some method to the madness of collection on overdue debt, the RBI has asked banks to inform the borrower about the details of recovery agents while forwarding default cases to the recovery agencies.

As a double check measure, it has also asked agents to carry a copy of the notice, an authorisation letter from the bank,  along with an identity card issued to him by the bank or the agency firm. Even more important is that in case the bank assigns a different recovery agent to collect the debt, it also has to advise the borrower of the change, and the new new agent will also have to carry the notice,  the authorization letter, and the identity card.

The RBI says that the the authorisation letter should have the telephone numbers of the relevant recovery agent, and the banks will need to maintain a tape recording of the content, or text of calls made by recovery agents to the customers, and vice-versa. Additionally, the bank will have to maintain up to date details of its recovery agents on its website.

In its recommendations, the RBI has said that each bank should have a mechanism for the redressal of borrowers' grievances with regard to the recovery process, the details of which should also be provided to the borrower along with the details of the recovery agent. In cases where a grievance or complaint has been lodged by the borrower, the RBI has recommended that banks should not forward cases to recovery agents till they have finally disposed of any grievance or complaint.

However, it has allowed room to banks for preventing the misuse of this criteria by saying that where the bank is convinced (with appropriate proof) that the borrower is continuously making frivolous complaints, it may continue with the recovery proceedings through the recovery agents even if a grievance or complaint is pending with them.

To curtail the strong arm tactics adopted by recovery agents, mostly on account o the stiff recovery targets or offer high incentives offered to them, the RBI has asked banks to ensure that the contracts with the recovery agents do not induce adoption of uncivilized, unlawful and questionable behaviour or recovery process.

The RBI has also mandated adequate training for recovery agents for them to accord due care and sensitivity in matters such as hours of calling, privacy of customer information etc. It has requested the Indian Banks' Association to formulate, in consultation with Indian Institute of Banking and Finance (IIBF), a certificate course for Direct Sales Agents / Direct Marketing Agents / Recovery Agents with minimum 100 hours of training.

This training would be mandatory for recovery agents of banks once the course is introduced by IIBF, and banks would have to ensure that within a year of its introduction, all their recovery agents have undergone the traiing, and are certified by the institute. It has also suggested that banks only employ people who are certified in the above course from the IIBF, as recovery agents.

The RBI has also asked for cases of loans, personal loans, credit card loans and housing loans with less than Rs10 lakh to be referred to Lok Adalats. It has also suggested that the services of credit counsellors should be used for providing suitable counselling to the borrowers in cases where particular borrowers deserves sympathetic consideration.