Dealing with loan recovery agents
When I first heard about the suicide of the father of three girls (all below the age of 10), Prakash Sarvankar, because of harassment by loan recovery agents, it reminded me of the suicides of indebted Vidarbha farmers and how harassment by loan recovery goondas (goons) played a large part in driving them to suicide. My uncle who is a farmer has also told me of horrifying tales about how farmers in Vidarbha were being humiliated and driven to the edge of despair by loan recovery agents. In India, it is not easy for individuals to declare themselves bankrupt, like in the USA.
It almost seems as if the attitude of the banks is that if you don’t pay up then you can go kill yourself! This inspite of the fact that the Supreme Court had rapped banks on the knuckles earlier this year for not following the RBI guidelines and continuing to use goons to recover loans. They should “deal with defaulters as per the procedure laid down in the law and the Reserve Bank of India guidelines” – that is what the court had said.
The banks have a right to recover the dues but they cannot use force to recover the loans… you can’t send goondas to their (defaulters) house…there are ladies alone at home…
In Sarvankar’s case, the loan reovery agents, from a reputed bank (ICICI), entered his home several times and humiliated him in front of his wife and three small children. He had taken a loan of Rs 50,000 from ICICI Bank, and was “145 days past due on his loan repayment.” Another recent case, reported just yesterday, was about HDFC Bank investigating a complaint “that one of its employees threatened to kill a customer’s nine-year-old son and others of the family over non-payment of credit card bills.”
Are banks giving loans after a thorough scrutiny?
I feel all the more strongly about this because there an increasing number of cases of people who cannot pay because banks are being irresponsible in disbursing loans. It says here:
In India, the situation has worsened due to banks aggressively pushing loans, even unsecured ones, to individuals to prevent idle assets on their books…most customers in India are not financially educated and banks are luring them to take more and more loans, often without checking their financial position…
Well, we all know about credit cards being foisted on us, at times without even being asked! All kinds of tricks are used to dump credit cards on unsuspecting people, and there are constant calls to take loans. I get such a call every other day inspite of having registered on the DNC (Do Not Call Register). People like you and me are probably not tempted, just irritated, and can just tell the bank to go jump, but not everyone is in the same boat. I know of a case of a man who works in a government office and gets just about Rs 6000/- a month (he has three school-going children) who took a credit card and is now stuck with a debt.
And in Sarvankar’s case, the biggest mystery is why the loan was given to him in the first place! His own wife has questioned the bank about this because her husband was apparently not eligible for a loan as he was not working! She also claims that she had no idea the loan had been given. Well, if banks prefer to give loans to people who are unemployed or without checking if the person has the capacity to pay them back, what can they expect but non-payment?
Thankfully, in Sarvankar’s case the law has acted. The four recovery agents were arrested immediately and so was the owner of the agency contracted by ICICI to recover the loan amount. The bank too seems to be chastened and has decided to compensate Sarvankar’s family with an ex-gratia payment of Rs 15.50 lakh. And ofcourse it has sacked the agency whose employees were involved in this incident.
What are the banks not allowed to do?
Well, debt recovery agents (DRA’s) are not allowed to enter a person’s home without permission. And they have to carry an identification card with them at all times. Also, RBI rules lay down that the state DRA’s can contact customers only between 7.00 a.m. and 7.00 p.m. and has to maintain civil discourse. The customer is not to be humiliated publicly or in front of his family members.
What should borrowers do?
Rediff.com has some good advice for those who find it difficult to pay back the money they have borrowed. They say:
1. Avoid giving post-dated cheques to banks because if a cheque bounces, it is a criminal offense and the punishment can be a two year jail term. This gives the lender an even greater leverage over the borrower.
2. As soon as you realise that you have a problem, discuss the issue with the bank, even before you default on a loan payment. Its not just the DRA’s you have to fear, but mounting interest rates. This can be particularly bad if it’s a credit card payment which is not paid on time.
3. If necessary sell off assets. If selling off the asset means you have to go into a smaller house, so be it. But remember that if you default and you have mortgaged your property, you lose even items inside your home.
4. If things go so far that the bank sends you a legal notice (after reminders have failed to elicit any response from you) then you need to talk to the bank immediately. Try and reach a settlement. If you can convince the bank that it is a temporary problem, that you are still credit-worthy and if you have a good re-payment record, your bank could agree to a compromise. They could either agree to to re-structure the installments, or settle the matter by accepting a smaller amount in a lumpsum payment.
5. If you have absolutely nothing left, and are at the end of your tether, you need to seek police protection. But keep a copy of all notices and reminders because these notices specify a period after which the bank can take action against you.
Moneycontrol.com gives some tips on how to handle threats from banks.
1. Call up the bank and complain bitterly about any harassment from DRA’s.
2. Threaten litigation if need be.
3. Go to the nearest police station and file a complaint.
4. Keep a tape recorder handy. In the tape, try to get the agent to clearly state what he wants from you, what bank he is from, his name, and his agency’s name. It is important to keep proof of all threat calls. Even better, install a camera in your home if loan recovery agents dare intrude there!
5. You can sue the bank individually, if you have the resources.
6. If you do not want to get involved personally, approach a consumer action group.
Banks have a responsibility
Banks need to be different from moneylenders of yore. Giving loans knowing full well that the party is not credit worthy is unprofessional, whether deliberate or not. Sure, banks can make a mistake, a genuine mistake. But the way many banks are running their personal loans business makes me suspect that everything isn’t above board.
In some cases, they may have given the loan to a credit-worthy person, but an unforeseen situation like a sudden health expenditure, job loss or death, or a collapse of a business could have made it difficult to pay back the loan. But in such situations, things can get sorted out, although with a lot of heartburn. In such cases, the banks and the borrowers need to hammer out a solution and this is in their own interest. Not caring whether the defaulter lives or dies is unforgivable.
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