RBI tells banks, regulated entities to desist from harassing borrowers for over dues

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The Reserve Bank of India on August 12 issued additional restrictions for banks and regulated entities to desist from harassing borrowers for over dues

“In view of concerns arising from the activities of these (recovery) agents, it is advised that 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,” the RBI said in a release.

This includes acts intended to humiliate publicly or intrude upon the privacy of the debtors' family members, referees and friends, sending inappropriate messages either on mobile or through social media.

Further, regulated entities should ensure that these agents do not make threatening and/or anonymous calls, persistently call the borrower and/ or call him/her before 8 am and after 7 pm for recovery of overdue loans, making false and misleading representations, the regulator said.

These additional guidelines are over and above with the existing directions issued by the central bank. Any violation in this regard by regulated entities “will be viewed seriously,” the RBI said.

The RBI observed that the agents employed by regulated entities have been deviating from the extant instructions governing the outsourcing of financial services. The RBI emphasized that the ultimate responsibility for regulated entities’ outsourced activities vests with them and they are responsible for the actions of their service providers including those of recovery agents.

The additional guidelines come amid increasing cases of borrower harassment by loan recovery agents. There have been several instances of recovery agents landing at borrowers’ doorstep and indulging in arm-twisting tactics. These agents also morph borrowers’ face onto nude photographs and publicly harass them.

RBI Governor Shaktikanta Das on June 17 had said that there have been complaints of recovery agents using foul language. Such kinds of activities by recovery agents are "unacceptable" and pose "reputational risk" for the financial entities themselves, the governor had said. The RBI will address this issue very seriously as far as supervised and regulated entities are concerned, Das said.

The additional guidelines issued on August 12 is applicable to all commercial banks, financial institutions, non-banking finance companies and housing finance companies, cooperative banks and asset reconstruction companies, said the RBI.