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FAIVM Seeks Regulation For Banks' Recovery Agents
The income of small businesses and middle class of society has been greatly affected and default has started coming in installments or interest on loan provided by banks or private lenders.
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Federation of All India Vyapar Mandal raised voice against illegal process used by the recovery agent for loan /interest recovery by banks / NBFCs.
The post-corona lock-down has caused a deep financial crisis in front of traders and the general public due to the slackness in the economy. During this crucial time, the income of small businesses and middle class of society has been greatly affected and default has started coming in installments or interest on loan provided by banks or private lenders.
FAIVM mentioned, in a letter addressed to Finance Minister, small businessmen get only 5% loan facility from banking system. The remaining 95% receive loans from either non-financial finance companies or some other private sources or lenders. For those who are availing credit from Banks are getting various relief and concessions but those who have availed credit/loan from private lenders or private banks, who are about 95%, are now facing a tough time as their lenders are pressuring to repay installments and interest . Default in installment and interest are visible in vehicle loan, personal loan, loan for purchase of household goods or loan on jewelry etc.
Private sector banks and private sector loan providers have kept recovery agents for recovery of loans. It threatens the debtor in the event of not being able to pay installments or interest, insults them socially, and does not hesitate to take the law into his own hands. Though these kind of defaults are already covered under various Civil laws but the recovery agent, above all the laws, uses all the illegal tricks to recover his installments and interest, like sucking the blood of a deceased person.
Mr.V K Bansal, National General Secretary of Federation of All India Vyapar Mandal said that they had urged union Finance Minister that as some rules laws have been made for other organizations, similarly some laws should also be made for the recovery agent.
FAIVM in its letter dated 26th September 2020 have suggested few guidelines which needs to be followed during recovery process.
1) Every bank or financial institution should be required to submit a list of accounts of their recovery agents to the concerned police station in jurisdiction.
2) Every recovery agent should first hand over local police the business agreement with the bank or financial institution, guidelines from banks or financial institutions etc. for better understanding of matter by Police Officer.
3) It should be mandatory for every recovery agents to give advance information to the local police regarding the criminal history of their employees.
4) Whenever the recovery agent is sent for recovery, firstly it should be mandatory to inform the local police by the bank or financial institution and any conversation related to recovery from the debtor should be done only in the presence of police. The government should ensure that no recovery agent is able to take the law into his own hands.
5) In many cases the value of the pledged property or securities is more than the loan amount. In such cases recovery is not possible for a long time. In such cases recovery should be made only by a court order.
6) Government should arrange the help of a special officer / helpline to listen to the grievances of the borrower in case of any threat or intimidation.
7) Ensure adherence to the guidelines given earlier by the Reserve Bank and by various honorable High Courts.
Mr V K Bansal have shown its faith that the small business people are losing their business or sources of income due to corona epidemic in the public interest, to save them from the wrath of recovery agents appointed by banks and financial institutions, the government will formulate a detailed rules and policy on the above at the earliest and will provide some relief in crisis time.