RBI warns HDFC Bank on recovery practices, fines ₹1 crore
What's the story
The Reserve Bank of India (RBI) has imposed a fine of ₹1 crore on HDFC Bank for violating guidelines concerning the behavior of recovery agents.
The central bank's action highlights the need for lenders to adhere strictly to its code of conduct, particularly in relation to respecting customer privacy and maintaining appropriate contact hours.
The penalty was levied after it was discovered that HDFC Bank's recovery agents had been contacting borrowers outside the permissible hours, specifically between 7am and 7pm.
Rules
RBI's guidelines for recovery agents
The RBI has set clear guidelines for recovery agents, emphasizing the importance of respecting customer privacy and adhering to rules even when a borrower is facing difficulties with loan repayments.
These guidelines stipulate that recovery agents must maintain confidentiality about a borrower's debt and are prohibited from disclosing this information to third parties or discussing it publicly.
Any violation of these rules can lead to penalties from the central bank.
Protection
Borrowers' rights and responsibilities
Borrowers are advised to verify the identity of recovery agents before interacting with them.
This can be done by checking their ID card to ensure they are authorized by the bank or financial institution to collect outstanding dues.
If a recovery agent violates these guidelines, borrowers have the right to file a complaint with the bank or take legal action, supported by records of harassment or inappropriate behavior.
Default management
Managing loan defaults and recovery methods
In case of a loan default, borrowers can take certain steps to manage the situation and avoid aggressive recovery tactics.
These include informing the bank about financial difficulties as early as possible, restructuring loans for a more manageable repayment schedule, or considering a one-time settlement if unable to pay the full loan amount.
However, it's important to note that such settlements can impact one's credit score negatively.
Improving books
HDFC Bank in talks to sell ₹8,400 crore in loans
In related new, HDFC Bank, India's largest private sector lender, is reportedly negotiating with several international banks to sell up to ₹8,400 crore in loans.
This strategic move aims to decrease its credit book and align it more closely with deposits.
The banks involved in these discussions include Barclays Plc, Citigroup Inc., JPMorgan Chase & Co., and ICICI Bank Ltd.