RBI GUIDELINES TO BORROWERS

Few recent incidents, which were blatantly outrageous and unlawful have prompted sharp reactions from the RBI, which later formulated guidelines for loan recovery agents and a strict warning of banning the recovery agents if the banks didn't follow them diligently. But many bankers’ feel that the whole process of loan recovery can't be put in a formal framework or bound by guidelines due to the inherent nature of the work involved. Any such step could encroach on the autonomy of the banks and hamper recovery efforts.

However subtle it may be but loan recovery will always involve some element of pressure and coercion because it involves a borrower who has defaulted and the money has to be recovered from him. Bankers believe that without sufficient incentives and targets, the recovery procedure won't be possible at all. Loan recovery process is just like another job where targets are set and incentives are paid to those who achieve the targets. But all this should be within the legal framework and a line should be drawn between the acceptable and the avoidable.
The RBI guidelines that every borrower should be informed about the loan recovery agents, only one number should be used to make recovery calls, borrowers shouldn't be contacted during odd hours and the process should be carried in a 'civilized' way are definitely good but leave much room for manipulation.

A defaulter will definitely avoid phone calls and will have to be pursued to get back the money. This will often involve some tracing and tracking of the borrower even if it means contacting him at odd hours. Another concern of the bankers is that willful defaulters will use these guidelines to get around the entire loan recovery process by crying foul every time they are confronted by such efforts. They can claim being harassed by the agents whenever they are reminded about over dues or default.

What needs to be understood here is that loan recovery is an essential part of lending process and adherence to the rule of law and avoidance of intimidation and questionable methods will definitely help. Properly trained loan recovery officers following the RBI's guidelines in both letter and spirit, will help rebuild the confidence among borrowers.