In India, the government and regulatory bodies like the Reserve Bank of India (RBI) have introduced various laws and guidelines to protect consumers from bank harassment, especially in the context of debt recovery, abusive practices by recovery agents, and unethical collection methods. Here are some recent laws and guidelines that help prevent bank harassment:
- RBI Guidelines on Recovery Agents (Updated)
The Reserve Bank of India (RBI) has laid down strict guidelines for banks and their recovery agents to prevent harassment of borrowers. The most recent updates emphasize fair treatment and prohibit unethical practices.
Key Points:
- Recovery Agent Training and Certification: Recovery agents must be properly trained and certified before being engaged by banks or financial institutions.
- Time Restrictions: Banks and recovery agents are prohibited from calling borrowers before 8 AM or after 7 PM. Recovery agents should not visit the borrower’s home outside these hours.
- Proper Identification: Recovery agents must carry proper identification and authorization letters from the bank when contacting borrowers.
- Ethical Behavior: Agents are prohibited from using abusive or threatening language. Harassment, physical threats, and intimidation are strictly forbidden.
- No Public Shaming: Banks or agents cannot publicly humiliate the borrower or contact their family, friends, or workplace unless they have signed guarantors or co-borrowers.
- Written Communication: Recovery agents are encouraged to communicate in writing and maintain professionalism in their conduct with borrowers.
What to Expect:
If these guidelines are violated, the bank or the recovery agent could face disciplinary actions from the RBI, and borrowers can escalate the matter to the Banking Ombudsman for resolution.
- Consumer Protection Act, 2019
The Consumer Protection Act, 2019 offers protection against unfair trade practices, which can be extended to cases where banks or recovery agents use unethical means to recover loans.
Key Protections:
- Unfair Trade Practices: Harassment by recovery agents or banks can be classified as an unfair trade practice. Consumers can file complaints in Consumer Courts if the harassment involves mental agony, financial loss, or unfair behavior.
- Compensation for Harassment: Consumers can claim compensation for emotional distress or financial harm caused by the harassment.
What to Expect:
You can file a complaint in a District Consumer Forum if the harassment persists, and claim compensation for harassment and mental suffering caused by the bank’s practices.
- The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002
While the SARFAESI Act allows banks to seize and sell defaulters’ secured assets, recent legal interpretations have ensured that this act cannot be misused to harass borrowers.
Key Safeguards:
- Notice Period: Banks must provide a 60-day notice before taking possession of any property under this Act.
- Fair Recovery Process: Borrowers must be given an opportunity to repay the loan even after the possession notice. Misuse of the law to harass borrowers is not permitted.
What to Expect:
If the bank attempts to misuse SARFAESI to intimidate or harass you, you can challenge the action in the Debt Recovery Tribunal (DRT) or file a complaint under the Banking Ombudsman Scheme.
- Banking Ombudsman Scheme, 2006 (Amended in 2021)
The Banking Ombudsman Scheme is a dispute resolution mechanism introduced by the RBI. The scheme allows customers to file complaints regarding deficiencies in banking services, including harassment by banks or their recovery agents.
Key Provisions:
- Grievance Redressal: You can file a complaint with the Banking Ombudsman if the bank fails to resolve the harassment issue within 30 days of your written complaint.
- Compensation: The Ombudsman can order compensation if it is proven that the bank’s actions have caused mental harassment or distress to the consumer.
What to Expect:
The Ombudsman will investigate the case and may summon the bank to settle the dispute. You may receive compensation for the harassment faced.
- Indian Penal Code (IPC) Provisions
In severe cases of harassment involving threats, intimidation, or unlawful coercion, legal recourse can be sought under the Indian Penal Code (IPC).
Key IPC Sections:
- Section 503 (Criminal Intimidation): Recovery agents or bank officials can be charged if they use threats or intimidation.
- Section 506 (Punishment for Criminal Intimidation): If the harassment escalates to criminal intimidation, the offender can face imprisonment.
- Section 294 (Obscene Acts and Words): If the agent uses obscene language or inappropriate behavior, they can be charged under this section.
What to Expect:
You can file a First Information Report (FIR) with the police. If the complaint is proven, the harassing individual can face legal consequences, including fines or imprisonment.
- Telecom Regulatory Authority of India (TRAI) – DND and Harassment Calls
If you’re receiving repeated phone calls or spam messages from the bank or recovery agents, you can register for Do Not Disturb (DND) services through TRAI.
Key Protections:
- DND Activation: You can activate DND by sending an SMS to 1909 or using your telecom provider’s app.
- Telecom Complaint: If the calls persist even after registering, you can file a complaint with TRAI, and the recovery agent’s phone number can be blocked or fined by your telecom provider.
What to Expect:
If the issue persists, the Telecom Service Provider may take action against the harassing party, including blocking their number.
- RBI Guidelines on Loan Recovery via Digital Lending Platforms (2020)
With the rise of digital lending platforms, the RBI issued additional guidelines in 2020 to prevent harassment from online lenders.
Key Highlights:
- Transparency: Digital lending platforms must provide transparent and detailed information about repayment schedules, interest rates, and recovery processes.
- Recovery Agent Conduct: Digital platforms must ensure their agents adhere to the same code of conduct as banks when it comes to debt recovery.
- Grievance Mechanism: Platforms are required to have a grievance redressal system for borrowers.
What to Expect:
If you are harassed by recovery agents from a digital lending platform, you can escalate the issue to the RBI or Banking Ombudsman.
