Recently I came across a news article - "Corporation Bank staff stage dharnas outside defaulters' premises" - and I was reminded of the yester-years when harassment by loan recovery agents' had become a major concern.
That was when most Banks (including PSUs) had hired external recovery agent services to tackle the problem of rising NPAs or bad loans. These recovery agents resorted to tactics like calling up friends or relatives of the defaulter, or sending eunuchs to their homes or simply threatening the defaulter day in and day out.
Finally, the RBI stepped in and issued guidelines to banks, essentially restricting such unethical activities by these recovery agents. Today, most banks have their own loan recovery departments and the recovery process is much more subdued.
The article that triggered the memory was about Corporation Bank staff at Mangaluru, Karnataka resorting to dharnas outside the premises of wilful defaulters - people who have the ability to repay, but are not willing to do so. On the face of it, this seems like a good idea. A peaceful solution to tackle difficult and wilful defaulters - well, other than the fact that your customer will not return to you after the transaction is over.
But the effectiveness of such a drastic step depends more upon how judiciously Banks use them against their customers. There is no one-size-fits-all. The bank has stated that this is not something they will ever consider for farmers. Well, that they would not. But will this trigger another set of unorthodox tactics in loan recovery by banks in India?
Link to the article:
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