Lok Sabha Question No. 129 (STARRED), answered on 2019-07-01
Subject: Illegal Recovery of Loans
Ministry: FINANCE
Asked by: Rama Devi, Giridhari Yadav

## GOVERNMENT  OF INDIA

## MINISTRY  OF FINANCE DEPARTMENT  OF FINANCIAL SERVICES

## LOK SABHA

## STARRED QUESTION NO: †*129 TO BE ANSWERED ON THE 1 st  JULY, 2019/ASHADHA 10, 1941  (SAKA)

Illegal Recovery  of Loans

## †*129:  SHRIMATI RAMA  DEVI: SHRI GIRIDHARI  YADAV:

Will  the Minister  of FINANCE  be pleased to state:

- (a) whether  the Reserve  Bank of India (RBI) at its own  level  does not take  any  action  on illegal recovery  of loans by  the private  sector  banks;
- (c) whether  the Reserve  Bank  of India (RBI) can not take  any  action  on illegal  recovery  of loans by the private  sector  banks  unless anyone lodges a complaint  in this  regard;  and
- (b) if so, the details  thereof;
- (d) if so, the details  thereof  along  with  the reaction of  the Government  thereto?

## ANSWER

FINANCE  MINISTER

To be answered by

(S mt. Nirmala  Sitharaman)

- (a) to (d): A statement  is laid  on the Table  of the House.

***

Statement  as referred  to in reply  to parts (a) to (d) of Lok Sabha Starred  Question  no. †*129  for  answer on 01 st July,  2019/  Ashadha 10  (Saka), 1941  regarding  'Illegal Recovery of Loans' by SHRIMATI RAMA  DEVI and SHRI GIRIDHARI  YADAV,  Hon'ble Members of Parliament

(a)  to  (d):  With   regard   to  action on  illegal   recovery   of  loans   by   private   sector   banks,   Reserve Bank of India (RBI) has informed  that  it has advised banks  to have Board- approved  policies  on such issues including, inter-alia , loans and loan recovery  policies,  and that  banks  are required  to take  credit-related  decisions  based on their  internal  assessment of the commercial  viability of the loan within  their   Board-approved  policies  and regulatory guidelines.   Further,   RBI  has  advised banks  to  take   into   account   the  following   specific  considerations   while   engaging   recovery agents-

- (ii) for ensuring  due notice  and appropriate  authorisation, banks  to inform  the borrower details   of  recovery   agency firms/companies   while   forwarding   default   cases  to  the recovery  agency;
- (i) due  diligence   process  in  place  for  engagement   of  recovery   agents,   which   should   be structured  to cover,  among  others  individuals  involved  in the recovery  process;
- (iii) to update  details  of the recovery  agency engaged  by  banks  on the bank's  websites;
- (v) terms and conditions  of the contract  should  be strictly  in terms  of the bank's  recovery policy,   and  should   contain   provisions   regarding   (a)  notice   period   before  taking possession, (b) circumstances under  which the notice period can be waived, (c) procedure  for taking  possession of the security,  (d) provision  regarding  final  chance to  be  given   to  the  borrower   for  repayment of  loan   before  the  property   is  sold  or auctioned,  (e) procedure  for giving  repossession  to the borrower,  and (f) the procedure for sale/auction  of the property;
- (iv) where   a  grievance/complaint has  been  lodged,   banks   shall   not  forward   cases  to recovery  agencies till  they  have finally  disposed of any  grievance  or complaint  lodged by the borrower  concerned;
- (vi) bank to have mechanism  to address borrowers'  grievances  with  regard  to the recovery process.

RBI has also issued 'Guidelines  on Fair  Practices  Code  for Lenders',  which  are required  to be adopted  by   banks,   duly   approved   by   their   Board.   The   said  circular   prohibits lenders   from resorting  to undue  harassment  in recovering  loans, viz., persistently bothering  the borrowers  at odd hours,  use of muscle  power  for recovery  of loans  etc.

With  regard  to complaints  RBI has informed  that  complaints  received  by  it regarding  violation of  the  said  guidelines   and  abusive   practices   followed   by   banks'   recovery   agents  are  viewed seriously.  In such cases, RBI can consider  banning  the bank  concerned  from engaging  recovery agents in a particular  area for a specified  period.  In case of persistent  breach  of above guidelines, RBI can also consider  extending  the period  or the area where  the bank  concerned  is barred  from engaging  recovery  agents.

RBI  has  further   informed   that   it  has  introduced   Banking   Ombudsman   Scheme  with   the objective   of  enabling   satisfactory   resolution   and  settlement   of  complaints.   After   making   a complaint  to the bank  concerned,  in case the bank  rejects  the complaint  or no reply  is received within  a period  of one month  from receipt  of complaint  or the complainant  is not satisfied  with the  bank's   reply,   he  or  she  may   file  a  complaint   with   the  Banking   Ombudsman, which   may award  compensation  as per the Banking  Ombudsman  Scheme.

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