Kerala

Arm of the law is stronger than muscle power

Many people do not borrow money from banks and financial institutions for genuine purpose. For example, some take loan on the pretext of investing in agriculture. But the money is spent for some unproductive purpose. Loans are at times spent even for luxuries. This makes repayment more difficult. Loans are given to undeserving people. Banks and financial institutions then try to recover the amount, sometimes resorting to harassment. This is natural because it is a question of their very existence. They cannot just forgo the amount. But highhanded means have to be avoided. For that, loans should be paid in instalments after verifying that the amount given as first instalment is spent for the purpose for which it is given. If the investment is for a genuine purpose, the bank can be sure that the borrower will repay the amount. If there is real loss due to unforeseen reasons, the government should intervene and write off the amount in genuine cases.

T.M. Paily

Kothamangalam

Many farmers committed suicide in the State in the past two years. Most of them had apparently not made good use of the agricultural loans availed by them. Quite a few spent the money unwisely. The government’s initiative of reviving agricultural sector by providing loans through banks at low interest rates is a welcome move. At the same time, judicious use of such financial assistance too must be ensured. Farmers face the wrath of loan recovery agents too. Many are not able to tolerate such harassment. The media should strive to creating awareness among the farmers about proper utilisation of financial resources from the banks.

Krishna K.

Kochi

Banks give away loans to public without checking their credentials and repayment capacity. They employ agents too to lure the common man with attractive offers. In major junctions, students, armed in a laptop are seen canvassing for these banks. A man in dire need might fall for it. Most will not be in a position to pay back the amount. Harassment follows and at times, suicide results.

Loans for education, agriculture and personal loans should have some criteria. The amount should be utilised only for that purpose, which is not done nowadays. RBI too should impose some restrictions on banks with regard to giving loans. Adequate surety must be made mandatory.

S.N. Thiruvazhiode

Ernakulam

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

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 penalized.

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

RBI guidelines clearly mention that it recovery of loans through force is unlawful. The public can, and must, approach the court of law in the event of harassment by banks. But many are reluctant to do so for fear of consequences. In such cases, there must be provision for the government to interfere and rein in such financial institutions.

Neelandon Kuruvattoor

Ottappalam

Reserve Bank of India has advised banks against setting stiff targets or giving high incentives for agents in recovery of loans. Banks have also been asked to strictly adhere to banking codes and standards. Despite this, recovery agents continue to harass borrowers. The agents seem to be unaware of the fact that the banks are responsible for their actions and that they must follow the procedures stipulated.

Before a loan is issued, the bank must ensure the repaying capacity of the borrower. Upon receiving a loan application, the financial officer empowered to grant loan has to scrupulously check the documents to be pledged by the borrower. Also, loans should only be issued only to meet unavoidable and obligatory expenses. Otherwise several people will become debtors. In the last decade, 1.5 lakh farmers committed suicide in India, mostly because of non-clearance of debts. Kerala is not an exception to this. Banks should be cautious while giving substantial loans. They must realise that prevention is better than recovery.

Kunhikannan

Koyilandy

Many financial institutions engage muscleman to recover loans. They humiliate borrowers by forcibly taking possession of vehicles and property. Even reputed banks are guilty of this egregious practice, though covertly. The Supreme Court had ruled that banks are responsible for the actions of their agents and wanted the forum of the Lok Adalat to be used for loan recovery. The RBI agreed to do so.

Recently the RBI has reiterated guidelines for loan recovery which forbids abusive practices. However majority of borrowers, being poor farmers and petty traders, are not aware of their rights and succumb to the intimidation of loan sharks. Government must conduct awareness programmes and establish legal aid cells for them and enlist the services of NGOs.

M.K.B. Nambiar

Mahe

Despite RBI guidelines and court directives, loan recovery agents continue to pester borrowers. The apex bank and the government must devise practical means to counter this problem. More importantly, people should be made to realise that such hooliganism is unlawful.

C.A. Rasik

Kannur

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

People take loans mostly because of unavoidable circumstances. Bank and other financial institutions lure the needy. The terms and conditions are so phrased that most of the prospective borrowers fail to grasp the hidden catch. In their anxiety to tide over the distress, they accept the terms readily.

Then comes the difficult part. Delay in repayment prompts the intervention of recovery agents who unleash measures akin to those adopted by the goons of private money lenders. The practice is unethical. Lending institutions should not play Shylocks. Loans should be offered only after proper scrutiny of the credentials of the borrower. Recovery efforts should not meander into rowdyism.

N. Sadasivan Pillai

Guntakal

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

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 Reserve Bank of India (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.

The individual recovery agents, the chief executives of the recovery agent firms and the bank’s executive who ordered the recovery should be criminally prosecuted. The recent orders by some courts/consumer fora are in the right direction.

The Securitisation Act which has provided for recovery agents should be amended to incorporate these penalties and criminal proceedings.

George Thomas

Thiruvananthapuram

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

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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