ICICI, HDFC Bank flouted recovery norms: FM

The government today said at least two private banks — ICICI Bank and
HDFC Bank — had repeatedly violated the guidelines of the Reserve Bank
of India (RBI) on engagement of recovery agents.

In response to a question in the Lok Sabha, Finance Minister Pranab
Mukherjee said 120 complaints had been received by the banking
ombudsman regarding violation of the norms during 2009-10.

He, however, did not say what action was being contemplated by the
government and only listed the action initiated by RBI, the Banking
Codes and Standards Board of India and the Banking Ombudsman Scheme,
which was amended in February 2009. The amendments allowed the
ombudsman to award a compensation of up to Rs 1 lakh in case of
complaints arising out of credit card operations of banks.
Besides, Mukherjee said banks had been asked to undertake period review
of the recovery mechanism and improve upon them. RBI had issued
detailed guidelines to banks on engagement and training of recovery
agents. Banks had been advised to ensure the recovery agents were
properly trained to handle cases with care and sensitivity,
particularly with respect to hours of calling, privacy of customer
information, etc.

Banks had been advised to ensure that the contracts with the recovery
agents did not induce adoption of uncivilised, unlawful and
questionable behaviour of recovery process, he said.

The finance minister also said the banks, as principals, being
responsible for actions of their agents, had been advised to ensure
that the agents engaged for recovery of the dues strictly adhere to the
guidelines and instructions issued by RBI, including the Banking Codes
and Standards Board of India.

RBI and the government were forced to act after banks were accused of
resorting to unfair means, including the use of musclemen, to recover
dues related to outstanding credit card bills and personal loans.