Loan recovery may lose muscle

Failed wrestlers and goons are an integral part of the country’s sophisticated financial sector. They are used in large numbers to recover dues from customers. Not averse to using some muscle power on the customer, they invariably get the job done. If the Reserve Bank of India (RBI) has its way, these tough-talking, muscle-flexing men could soon find themselves without a job. The RBI is working on a comprehensive set of guidelines that will make banks responsible for ensuring that their recovery agencies do not recruit individuals with a criminal background. The RBI move follows a sharp rise in complaints from credit-card holders against the recovery methods used by some banks. Recently, the Supreme Court had also expressed its strong reservations against banks recruiting goons for recovering loan dues. This does not mean that defaulters will be protected against the banks. Banking sources said once the new guidelines were in place, all banks would have to ensure that recovery agencies did a thorough background check of their employees, including police verification. The proposed RBI guidelines will also require each bank to publish the names of its recovery agencies, including on its website. Collection agents would be barred from making calls from any other number.