Kerala   

Let the arm of law beat muscle power

Uncivilised behaviour in a civilised society is totally unacceptable. Apart from civil law, the Parliament has strengthened the loan recovery efforts of banks with enactments like Provisions of Revenue Recovery, DRT Act and the Securitisation Act. Besides, publication of a defaulter’s name in the defaulters’ list of RBI and down-rating by Credit Information Bureau (India) Limited are other measures available to the financial system to enforce repayment of loans. Banks can also invoke provisions of criminal laws if a borrower has obtained the loan fraudulently or if there is any breach of trust during utilisation of the loan.

One reason for poor recovery of bank loans is that these enactments have made bank officials complacent in their appraisal, supervision and monitoring of the loans.

Verbal or physical abuse or harassment by the recovery agents should not be tolerated. Such instances should be severely dealt with and both the recovery agents and the banks concerned should be penalised by the RBI. George Thomas

Thiruvananthapuram

Consumerism is having telling impact on the life of middleclass Keralites, who are desperate to ape the lifestyles of the upper income strata. If his income is insufficient, he has no qualms about borrowing money. Some banks too adopt unhealthy marketing strategies to convince the needy that loans are available on easy terms. Everything will be smooth as long as the repayments are prompt. Once they are delayed, the borrowers will start facing the music from the banks or its recovery agents -- threatening calls, manhandling by agents’ henchmen and confiscating of vehicles and household goods. Chitti companies, private banks, new-generation banks, pawnbrokers and credit card companies use such strong-arm tactics, at times with the connivance of local police. This is a condemnable practice as the banks have every right to take a legal recourse.

The recent stricture by the Reserve Bank will do little good unless the State government implements it with right earnest .The stricture contains many guidelines like banks keeping track of details of recovery agents, intimation to the borrowers on recovery agents and formation of grievance redressal cell.

Today, some banks’ doings are tarnishing the image of the entire sector. This trend should be checked as early as possible.

Reghu P.L.

Thiruvananthapuram

The complexion of borrowing from banks and financial institutions has undergone a sea change in the past decade. Earlier, the procedure for taking loans from such agencies was a fairly long drawn out process. Now, they impose advances on customers. This shows that a good part of the profitable business of these institutions is interest income and service-charge income from distributed credit including those on credit cards.

Since a large risk is involved in recovery of these loans, and because they form a huge chunk on their income, banks at time deploy undesirable means to recover them.

Many a time the failure to repay the loan in time stems from the inadequate understanding of the terms and conditions of it by the borrower. One way of minimising undue default in the repayment of instalments is to make it mandatory for the lending agencies to explain to the borrower conditions of the loan, especially the methodology for calculating the interest.

This way, the borrower will have an idea about the feasibility of paying instalments. The lending institution should send a notice when the instalment is defaulted beyond the grace period or beyond the point where penal charges should be considered.

Loans without collateral are normally given only to those persons known by the institution to be credit-worthy and reliable. For secured loans, the normal course of action – of recovering amount from the securities – in the event of default, after giving sufficient notice to the borrower. These measures, if sincerely adopted, will help banks do away with third degree methods for loan recovery.

BKS Nair

Thiruvanathapuram

Three types of banks deal with general public -- commercial banks, cooperative banks and new generation banks. The first two do not take recourse to harassment for recovery of loans. They have specific norms to follow before granting loan. But new generation banks are very liberal in granting loans. Their dealings are extremely cordial up to disbursement of loan. So, the middleclass people are more attracted to these banks. To avoid harassment, Keralites should cultivate the habit of availing loan only for genuine needs, and only after assessing their repayment capacity.

P. Prakasan

Kottayam

New generation banks and financial institutions resort to even hooliganism to recover the loan amount. In a petition filed by these institutions before the Supreme Court seeking use of force on customers, the court ruled that the use of force and other third degree methods to recover dues was unlawful. It added that banks are entitled to resort to legal modes for loan recovery. Even now the new generation banks keep goons to threaten borrowers.

The public must avoid such banks and ideally deal with nationalised ones. In case of an assault, the concerned may move the appropriate authority viz. the police. If they are indifferent, file a complaint before the judicial magistrate.

V.P. Ramesan

Thripunithura

Instances of loan recovery agents of banks/financial institutions like credit card companies resorting to unethical methods against defaulting borrowers/clients have, of late, increased considerably. While nobody can question a bank’s motive to initiate loan recovery steps, the whole process needs to be done in a dignified and transparent manner. Recovery agents in the guise of goons and musclemen intimidating a borrower/client cannot be tolerated. The banks/financial institutions should strictly follow the recent guidelines issued by Reserve Bank of India in this regard.

Ideally the process of loan recovery should be handled in house by banks/financial institutions. The system followed by State Bank of India and its associates in this regard can be followed by others. If at all still a recovery agent is to be appointed, it should be ensured that his antecedents are thoroughly screened so that the work is not handed down to an unscrupulous person. If any recovery agent is found to be crossing the limits of probity, appropriate criminal action must be initiated against him. The bank concerned must be penalised.

T.N. Ramachandran Nair

Thrissur

Some cases which caught the public’s attention, like the case of suicide of Rajani S. Anand’s, who ended life since she was not given a loan, have forced banks to be more lenient on this issue. Many people misuse this easily available credit. Problems arise when banks try to recover the amount.

The commission agents are duty bound to collect the amounts from the borrowers. They are paid for this by the banks. RBI has issued instructions not to take stringent action against borrowers, but the banks have no other way.

Governments write off loans when they come to power. But this cannot be continued for long. Prime solution is avoiding misuse of loans.

P. Sankaranarayanan

Thripunithura

Banks are expected to follow the guidelines of the Banking Regulations Act 1949 and the Negotiable Instrument Act. One wonders how strictly it is adhered to.

The sector is rife with unhealthy competition. Banks and other financial institutions literally hunt for those in need of loan. As per norms, loans must be issued against approved guarantees scheduled under the Banking Act. But now, loans are given as per banks’ whims. This is particularly true for vehicle loan. Asking commission agents to seize vehicles from the defaulters is unjustifiable. Take defaulters to court. The banks must evolve a new banker-customer relationship, create a vibrant banking culture, with least trouble to both the banks and the borrowers.

If the present banking rules are not strong enough to recover loans, the Reserve Bank, with the approval of the Central government, must make new rules.

G. Muraleedharan

Vattiyoorkavu

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