RBI’s stern warning to HDFC Bank: Rein in recovery agents, respect borrower privacy

The Reserve Bank of India (RBI) imposed a ₹1-crore penalty on HDFC Bank for violating guidelines related to the conduct of recovery agents. This penalty has drawn attention to the often aggressive tactics used by recovery agents and reminded lenders of their obligations to follow the RBI’s code of conduct, Moneycontrol reported.

Violation of RBI timings guidelines

The RBI found that HDFC Bank's recovery agents had contacted borrowers outside the permissible hours, between 7 am and 7 pm. Contacting borrowers beyond these hours, particularly after 7 pm and before 7 am, is against the regulations. The penalty underscores the importance of respecting customer privacy and adhering to the rules, even if the borrower is struggling with loan payments, the report said.

Key rights for borrowers against recovery agents

Right to Verify Agent Identity

With rising fraud cases, borrowers should protect themselves by verifying the identity of recovery agents. Before engaging with a recovery agent, always check their ID card to confirm the bank or financial institution authorizes them. Ensure that their details match and are officially recognized to collect outstanding dues.

Right to Privacy

Recovery agents are required to maintain confidentiality regarding your debt. They cannot disclose your debt details to third parties or discuss it publicly. If an agent breaches this privacy, borrowers can file a complaint with the bank or take legal action.

Right to Humane Treatment

Recovery agents must treat borrowers with dignity, respect personal space, and avoid harassment. They are only allowed to contact borrowers between 7 a.m. and 7 p.m. If these guidelines are violated, borrowers can take legal action, supported by records of harassment or inappropriate behaviour.

Steps to Manage Loan Defaults

If you have defaulted on a loan, there are steps you can take to manage the situation and avoid aggressive recovery methods.

Communicate with Your Bank

Inform your bank about your financial difficulties as soon as possible. This transparency can help recovery agents understand your circumstances and prevent miscommunication. Proactively working with the bank can also demonstrate your intent to resolve the issue.

Consider Loan Restructuring

Borrowers have the option to restructure their loans, which can provide a more manageable repayment schedule. Before agreeing to restructure, carefully review the terms to ensure they meet your financial situation.

Explore One-Time Settlements

A one-time settlement might be an option for borrowers unable to pay the full loan amount. This involves paying a reduced amount in exchange for clearing the debt. However, note that this will affect your credit score, as it will be marked as a "settlement" in your credit history, impacting future loan applications.