RBI directs ARCs to train recovery agents not to harass borrowers

Wants grievance redressal mechanism in place, says ARCs will be responsible for agents' actions

The Reserve Bank of India (RBI) on Thursday told asset reconstruction companies (ARCs) to ensure recovery agents do not harass people, by preparing a fair practices code.

It has also directed them to set up a grievance redressal mechanism for faster resolution of genuine complaints.

The RBI has made it clear that ARCs will be held responsible for the actions of their recovery agents who, in turn, must respect customer confidentiality.

“ARCs shall ensure that recovery agents are properly trained to handle their responsibilities with sensitivity, particularly with respect to aspects such as hours of calling, privacy of customer information, etc. They should also ensure these agents do not induce adoption of uncivilised, unlawful, and questionable behaviour or recovery process,” the central bank said in its notification on fair practices code for ARCs.

The companies will now be required to share the name and number of the designated grievance redressal officer with the borrowers. 

The mechanism must redress genuine grievances promptly, which includes dealing with issues pertaining to services provided by the outsourced agency as well as recovery agents.

Information gathered by ARCs should be kept confidential and not shared with anyone — including other entities in the group — except when required by law, when there is a duty towards the public to reveal information, or when the borrower has given consent. The RBI said such a fair practices code should be duly approved by the board and firms must follow transparent and non-discriminatory practices in acquisition of assets, while maintaining an arm’s length distance in pursuit of transparency.

ARCs should publicly solicit invitations for auctions, so that the process enables participation of as many buyers as possible. Upon repayment, ARCs should release all securities, subject to any legitimate right or lien for any other claim they may have against the borrower. 

If such a set-off needs to be exercised, the borrower has to be given due notice. ARCs must put in place a board-approved policy on management fees, expenses, and incentives — if any — claimed from trusts under their management. 

Such fees should be “reasonable and proportionate to financial transactions”, said the RBI.