Supreme Court raps banks for forcible recovery

LEARNING TO LIVE WITH RISING DEFAULTS

A bench headed by Justice Tarun Chatterjee said: "We deem it appropriate to remind the banks and other financial institutions that we live in a civilised country and are governed by the rule of law."

The court recalled that the Reserve Bank of India (RBI), in a letter accompanying its April 24, 2008, Guidelines on Engagement of Recovery Agents had stated that it might consider imposing a ban on banks engaging recovery agents in a particular area, either jurisdictional or functional, for a limited period.

"In case of persistent breach of above guidelines, the Reserve Bank may consider extending the period of ban or the area of ban," the judgment said.

"Similar supervisory action could be attracted when the high courts or the Supreme Court pass strictures or impose penalties against any bank or its directors/officers/agents with regard to policy, practice and procedure related to the recovery process."

The court said RBI had expressed its concern about the number of complaints filed against banks in the recent past for engaging recovery agents who tended to violate the rules.