Stop using muscle power for loan recovery

Nov 07: First banks call their customers with barrage of loan offers with unwanted telephone calls and then force defaulters to pay back by using nuisance measures with private recovery musclemen. With competition the banking institutions have certainly forgot the notion of service to people. Using hired goondas to recover loan amount is nothing but a clear-cut criminal activity and the Supreme Court now has to compel banks to stop using muscle power for loan recovery.

In a recent case Delhi State Consumer Dispute Redressal Commission has fined ICICI, India’s largest private bank, a worth of Rs. 55 lakh for using muscle power to recover the loan amount from the defaulter. The consumer commission has criticised the bank for hiring the ‘gundas’, who had beaten the defaulter’s friend unknowingly without trying to recognise the actual person. The Commission has also issued a notice to the Chief Executive Officer of the bank asking explanation for using muscle power to recover the loan going against the direction of the Supreme Court about the rules and regulation regarding loan recovery.

Imposing the fine of Rs. 55 lakh to the Bank, Justice J D Kapoor said, "We hold ICICI Bank guilty of the grossest kind of deficiency in service and unfair trade practice in breach of terms of contract of hire-purchase/loan agreement by seizing the vehicle illegally.”

“The commission imposes a fine of Rs. 55 lakh out of which Rs.50 lakh would be deposited in the favour of the State Consumer Welfare Fund for legal aid and rest Rs. 5 lakh would be given to the complainant as a compensation and margin money paid by the borrower towards the loan amount for the sufferings caused by the bank’s agents in a brutal and boorish manner because of which a youth was hospitalised for more than two weeks and received 17 stitches on his skull and back", said Justice Kapoor, president of the commission.

Slamming the bank, Justice Kapoor has said, "No civilised society governed by rule of law can brook such kind of conduct that cause multiple and serious injuries, and humiliating and insulting the man in public.”

Earlier, Y V Reddy, Governor of Reserve Bank of India had warned last week to all banks regarding such offences that usually are committed by loan recovery agents hired by the banks. “Only the banks would be responsible for providing loans and for the defaulters”, said Reddy.

On the other hand the Apex court also warned the banks to not to use unfair means for getting recovery. Court had also scolded the bank not to clarify all the hidden charges and post charges to the customer at the time of providing the loan. So, “Only the Banks are responsible for the loans and for the defaulters”, said the Apex Court.

The decision has come in the appeal of Tapan Bose, the complainant who had taken loan of worth Rs. 3.4 lakh from the ICICI bank for purchasing a Maruti Swift car on May 25, 2005. He paid all the instalments within time except last three instalments as his three checks had been bounced. The bank had not issued any notice to him and sent hired goons to recover the amount. According to Tapan, he and his friend’s 21-year old son Vinod Kumar had gone to the Delhi District Cricket Association Club near Ferozeshah Kotla on January 08, 2007. Bose entered inside the club while Vinod preferred for waiting him in the car. Vinod was listening music, when some vagabonds come to the car and ask for the recovery money. As Vinod asked about what type of loan, the vagabonds pulled him outside from the car and began to beat him brutally. They had struck an iron rod on his head and took back the car.

Tapan had got a missed call from Vinod’s mobile; he came out from the club and found Vinod laying on the road bleeding. Vinod was admitted in LNJP Hospital for more than two weeks. He had got 17 stitches on his skull and back as said by Tapan to the media.

The Police has recovered the car from the godown that was returned to Tapan, the car owner.

After liberalisation policy and quick economic growth, the competition among banks has rapidly increased in which banks are trying to distribute huge amount of loans by hook by crook and the number of defaulters have also increased since then. PSU banks usually take the legal and administrative help for recovery while private banks usually hire local recovery agents.

As per the guidelines of RBI and Indian Bank Association it’s for all banks to check thoroughly the background of recovery agents and make police in verification. The banks also have to publish details of its recovery agents in the official websites. But as of now no such thing is in its place.

A couple of months back after the direction of the Supreme Court, representative of different banks had met to come up with a common guideline for outside recovery agents and that was to be strictly followed but the same case continues and here by the same bank, after the suicidal death case in the month of September.