BackRegulator cracks the whip on rough recovery tactics
RBI on Tuesday fined Bajaj Finance Ltd ₹2.5 crore for failing to rein in recovery agentsThe action of the central bank gives hope to activists and lawyers working to protect borrowers from harassment by lenders
PremiumWhen Manoj Uttam Jankar missed paying the last instalment of his loan taken from Bajaj Finance, he had no idea it would start an unending cycle of intimidation that would last even after he settled his dues.
The 42-year-old from Mumbai had taken the loan to buy a mobile phone but missed the April instalment because he suddenly lost his job as a guard in a security agency.
On a single day, 23 December, the company tried debiting his account 28 times for repayments, said Jankar.
This was, Jankar said, even after he managed to repay the last pending instalment in cash on 16 December.
“Apart from the endless calls at the oddest of hours, during which I repeatedly explained my precarious finances, the company also presented a repayment mandate 28 times on 23 December leading to bank penalties against me because of cheque bounce charges," said Jankar, who is still looking for work.
Dozens of stories such as Jankar’s have emerged on social media in recent months highlighting the strong-arm tactics that have been employed by agents working for non-banking financial companies (NBFCs) to extract dues from vulnerable borrowers.
Incessant calls and veiled threats are some of the most commonly used techniques by recovery agents.
Responding to a flood of complaints, the Reserve Bank of India (RBI) on Tuesday fined Bajaj Finance Ltd ₹2.5 crore for failing to rein in recovery agents.
The quantum of the fine is not very significant, but industry watchers said it does a send a signal to banks and NBFCs against using coercive loan recovery tactics.
Bajaj Finance, one of India’s largest non-bank lenders with assets under management (AUM) of ₹1.04 trillion, did not respond to an email seeking comments.
The action of the central bank gives hope to activists and lawyers working to protect borrowers from harassment by lenders.
“In the past seven days, we have received more than 75 emails from customers of Bajaj Finance who have faced problems with their loans, including harassment by recovery agents," said Nikkhhil Jethwa, a member of the Loan Consumers’ Association, a collective of 15 advocates and social workers he co-founded with advocate Deepak More.
This is not the first time that the banking regulator has intervened and cautioned lenders against such practices.
On 24 June, the central bank said that banks and non-bank financiers, irrespective of whether they lend through their own digital lending platform or through an outsourced platform, must adhere to fair practices guidelines.
The central bank’s guidelines for non-banks on outsourcing of activities go back to 2017.
The guidelines say NBFCs must ensure that their direct sales agents, direct marketing agents and recovery agents are properly trained to handle their responsibilities with care and sensitivity, particularly in soliciting customers, hours of calling and privacy of customer information.
At least two borrowers have taken their lives after coercive tactics by lending apps, including publicly naming defaulters, according to media reports.
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