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Banking Central | Borrowers deserve freedom from harassment

The latest RBI directions are a step in the right direction but the problem lies with its implementation on the ground

September 22, 2022 / 08:17 PM IST
Representative image.

Representative image.

On August 12, the Reserve Bank of India (RBI) issued a set of rules that are meant to ensure fairness in banker-borrower dealings. The fresh instructions barred recovery agents from resorting to intimidation of borrowers. Putting it in perspective, the RBI said recovery agents cannot call borrowers before 8 am and after 7 pm. While issuing additional instructions to regulated entities including banks, NBFCs and Asset Reconstruction Companies, the RBI also noted that recovery agents are deviating from its instructions regarding recovery of loans.

The observations are critical as there are a number of cases reported from across the country in recent years where borrowers resort to extreme steps following persistent harassment by recovery agents. It is in this context the RBI said the regulated entities shall strictly ensure that they or their agents do not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts.

Banking Central

While the latest RBI directions are a step in the right direction but the problem lies with implementation on the ground. In the past too, the RBI has reminded banks about the need to ensure fairness in customer transactions but these warnings have fallen in deaf ears.

Many a times, harassment happens due to internal pressure to recover the money lent and when third party agencies are involved in the recovery process. To make sure financial services entities including cooperative banks and non-banking companies follow the directions in letter and spirit, the regulator needs to ensure strict punitive measures against wrongdoers and insist that banks must have a board monitored process to ensure implementation of fair practice code.


Every single banking customer in India deserves freedom from harassment and unfair banking practices. This is even more critical as the nation tries to bring in more unbanked population to the fold of formal finance. Without a strong plan for implementation of fair practices code, such regulations will remain only on paper.

(Banking Central is a weekly column that keeps a close watch and connects the dots about the sector's most important events for readers.)
Dinesh Unnikrishnan is Editor-Banking & Finance at Moneycontrol. Dinesh heads the Banking and Finance Bureau at Moneycontrol. He also writes a weekly column, Banking Central, every Monday.
first published: Aug 15, 2022 12:01 pm
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