Reserve Bank of India (RBI) on Thursday proposed norms which restrains regulated entities and their recovery agents from calling borrowers or guarantors before 8 am and after 7 pm for recovery of overdue loans. The RBI suggested that regulated entities should put in place a board approved code of conduct for direct sales agents (DSA), direct marketing agents (DMA), and recovery agents. They should ensure that the DSA/DMA/ recovery agents are properly trained to handle their responsibilities with care and sensitivity, particularly aspects such as soliciting customers, hours of calling, privacy of customer information and conveying the correct terms and conditions of the products on offer. Regulated entities include banks, regional rural banks, payments and small finance banks, NBFCs, housing finance companies, urban, state and central co-operative banks. Regulated entities include banks, regional rural banks, payments and small finance banks, NBFCs, housing finance companies, urban, state and central co-operative banks. “The RE and their recovery agents shall not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts,” the RBI said in the draft norms on Managing Risks and Code of Conduct in Outsourcing of Financial Services. The debt collection efforts include acts intended to humiliate publicly or intrude upon the privacy of the debtors/their guarantors’ family members, referees and friends, sending inappropriate messages either on mobile or through social media, making threatening and anonymous calls, persistently calling the borrower/guarantor, making false and misleading representations. These recommendations are part of the RBI’s effort to protect borrowers from harassment by recovery agents for collection of overdue loans. There have been many instances where borrowers have allegedly committed suicide over constant harassment by loan recovery agents. In September last year, RBI had directed Mahindra & Mahindra Financial Services (MMFSL) to immediately cease carrying out any recovery or repossession activity through outsourcing arrangements. The action came after media reports said that a 27-year old pregnant woman in Jharkhand allegedly died after being run over by a tractor which was forcefully driven by a recovery agency of the NBFC. The restriction was later lifted in January this year. RBI suggested that the regulated entities who intend to outsource any of their financial activities should put in place a comprehensive board approved outsourcing policy. It said that the board and senior management should be ultimately responsible for managing risks inherent in outsourcing arrangements. The lenders will have to evaluate the various risks related to compliance, contractual, exit strategy, legal and operation while outsourcing the services. RBI proposed that regulated entities should not outsource core management functions including policy formulation, decision-making functions like determining compliance with KYC norms and according sanction for loans. A regulated entity should take a final call on extending credit to any particular customer irrespective of whether a service provider is involved or not in the process, the draft norms said. The regulator has sought comments from various stakeholders by November 28, 2023.
