India is a rapidly growing economy, an economy that needs consistent credit to continue on its path of building infrastructure, roads, planning on future education, health management along with other crucial economic projects. Now, in such an environment the nation has witnessed the distribution of personal loans on a large scale.
All of such personal loans come with the possibility of strict repayment terms, high interest rates and forced liquidation of assets by loan recovery agents if the obligations of repayment are not met as per the contract agreement between the borrower and lender.
Due to this, loan recovery agents have become a common sight, still many borrowers are unsure about the extent to which these agents can approach them, especially with regards to visiting the borrowers houses or offices at odd hours.
To combat the same the Reserve Bank of India (RBI) has set clear guidelines to regulate the conduct of loan recovery agents and protect the integrity and repute of borrowers from difficulty and harassment.
The objective of this write-up is to discuss the basic rights, duties and obligations of borrowers to keep them protected from the whims and fancies of lending institutions and loan recovery agents.
Can loan recovery agents pay a visit to your home or workplace?
Yes, to clear state loan recovery agents are permitted to reach out to and visit a borrower’s house to recover the legitimate dues. Still, it is important to remember that these visits must be conducted in a civilised and ethical manner, within the framework of the RBI guidelines.
Further, loan recovery agents are not allowed to visit or contact borrowers at their work place or at odd hours as this is clearly considered as harassment and a violation of the borrower’s privacy.
According to RBI mandates recovery agents must identify themselves clearly and openly communicate about the repayment options, loan status, total interest applicable on the borrower from case to case basis. They are also strongly prohibited from using coercive or intimidating methods, including giving life threats, verbal abuse, physical intimidation or putting the borrower under psychological pressure.
What are the rights, responsibilities and obligations of a borrower during loan recovery?
All borrowers of personal loans have several rights designed to defend and protect them during the entire process of recovery:
- Right to privacy: Now under this, recovery agents cannot disclose your total loan default number, your loan status, amount of interest left to be paid etc., publicly. They can also not share your information beyond legitimate recovery purposes i.e., your information details, personal number, email-id etc., cannot be disclosed to individuals not officially related to the financial institution from where you have taken the loan. Article 21 of the Constitution of India guarantees the right to life and personal liberty, that includes the right to privacy as recognised by the landmark judgement of Justice K.S. Puttaswamy (Retd.) v Union of India, a 2017 judgement.
- Right to fair treatment: Borrowers must be treated with respect and in a dignified way. Loan recovery agents must contact the borrowers only between 8 am to 7 pm preferably or at mutually agreed times. This right is protected by Article 14 of the Constitution of India, it guarantees equality before the law and protection from arbitrary treatment by private and public actors.
- Right to a clearly explained notice: Now before any loan recovery action a properly defined notice must be served to the borrower. He should be given adequate time to read, think and revert back on the notice. Further, in cases where there is a possibility of asset auction borrowers must be given detailed information about the sale, amount, total asset value etc. Article 300A of the Constitution states that no person will be deprived of their property except by authority of law, elaborating that due process is essential at all levels of loan recovery.
- Right to raise a complaint: If you still face difficult behaviour and harassment then you can file a complaint with your respective bank, the banking ombudsman or even with your nearest police station. According to Article 19(1)(a) guarantees the right to freedom of expression, this includes the right to voice harassment and seek a seamless redressal.
What should you do if you still face harassment by loan recovery agents?
If loan recovery agents reach out to you forcefully and engage in harassment such as physical threats, persistent calls, unplanned visits etc., then the borrower should:
- Keep a clear record of all evidence and communications with you.
- Reach out and report the behaviour to the lender’s grievance redressal team.
- Keep a copy of the mail you have sent to the grievance redressal team.
- File a complaint with the banking ombudsman if no one from the bank helps.
- You can also file a First Information Report (FIR) in your nearest police station.
The RBI has the power to penalise banks or lending institutions who fail to keep a tab and control their recovery agents. The regulator can also impose bans and restrictions on loan recovery agents of a bank in certain areas.
Heading towards legal and ethical recovery practices
Given unethical recovery processes still remain a serious concern, consistent technological advancements are helping in improving the situation. Most of the lenders now focus on using automated reminders and digital platforms to reach out to communicate with the borrowers. This reduces the need for aggressive recovery and forced loan settlement tactics.
Hence, loan recovery agents can visit the borrower’s house, still they must follow and adhere to the strict guidelines and also ensure that visits to workplaces or at odd hours such as late night, after office hours etc., are prohibited.
The rights of the borrowers are defended by RBI regulations and constitutional guarantees. There has to be proper due diligence, training and teaching of recovery agents on the process of recovery, their accountability has to be set by the respective financial institution. On the other hand, dignity, integrity and privacy of the borrowers should always be given the first priority while initiating any loan recovery process.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers are advised to consult a qualified professional for specific guidance related to loan recovery and borrower rights.
