Follow fair practices code, ask staff not to harass borrowers, RBI tells asset reconstruction companies

Reserve Bank of India (RBI) Governor Shaktikanta Das

Asset reconstruction companies (ARCs) should ensure that their recovery agents do not harass debtors, the Reserve Bank of India (RBI) said on Thursday. ARCs should ensure that Recovery Agents are properly trained to handle their responsibilities with care and sensitivity, particularly in respect of aspects such as hours of calling and customer privacy, the central bank said.

“In the matter of recovery of loans, ARCs shall not resort to harassment of the debtor. ARCs shall ensure that the staff are adequately trained to deal with customers in an appropriate manner. They should ensure that Recovery Agents do not induce adoption of uncivilised, unlawful and questionable behaviour or recovery process,” the RBI said as part of a fair practices code announced for ARCs.

ARCs are firms that buy bad loans at a discount from banks and attempt to resolve the stressed assets through resolution. The RBI has listed out several points for ARCs as part of the fair practices code.

The regulator said ARCs should release all securities on repayment of dues on realisation of the outstanding amount of loan, put in place a Board-approved policy on the management fee, expenses and incentives, adopt transparent and non-discriminatory practices in the acquisition of assets and put in place a Board-approved Code of Conduct for Recovery Agents and obtain their undertaking to abide by that Code. ARCs, as principals, are responsible for the actions of their Recovery Agents, the RBI said.

Also, ARCs should constitute grievance redressal machinery within the organisation, the RBI said. “The name and contact number of designated grievance redressal officer of the ARC should be mentioned in the communication with the borrowers. The designated officer should ensure that genuine grievances are redressed promptly,” the RBI said.

ARCs' grievance redressal machinery will also deal with the issue relating to services provided by the outsourced agency and recovery agents, the RBI said.

Besides, ARCs shall keep the information they come to acquire in course of their business strictly confidential, and shall not disclose the same to anyone including other companies in the group except when required by law and with borrower’s permission, the RBI said.