Are banks right in using abusive debt settlement teams?

The risk of non-recoverable loans is built into the interest rate (i.e. high interest rate incorporates additional rate because of the risk premium). Also the loans are given on the basis of a legal agreement, and the banks are bound to follow the agreement for recovering the loan.

The banks are not doing any social service -- they are charging interest for the loan and also their agreement are majorly lopsided in their favour. Therefore, there is absolutely no excuse for any bank to use abusive debt settlement teams. If customer hire out abusive teams to teach the banks a lesson (for hidden charges, irritating bank loan scheme marketing calls, etc) will the banks tolerate it?

banks have to recover their loans. but they should not use abusive methods .

legal and decent steps to recover dues are available . they should use these only.

banks should not impinge on the cicvil rights of the borrower.

one word of advice for the bankers. start following up the repayment from the first instalment itself. once the overdues mount  borrower loses  the will and the resources to repay

Swathi, only some of the financial institutions use such methods, by and large no bank use abusive debt settlement methods. Settlements are to be done  and are being dobe on a win wn sitations only.  

Yes you are right Ms.Swati Raut.

Mr.Vipin Bhasin and others from this side have explained very well.

Avoid tempting with loans unless realizable security or paying capacity ensured either by arranging with employers or by assessing the business carried on by the borrower. In the name of performance "reckless loan Mela" is frittering away resources which have alternate productive usage. Think before giving loan instead of resorting to coercive methods for recovery which will ruin the economic life of the individual in the short term and the economy over long term. See the total economic good for the country, before boosting of performance by doling out deposits as loan for multifarious unproductive

purposes.     Let there  be real home work before loan dispersal

With regards P.Vedagiri.

Thanks for the referral Ms Jyoti

Abusive debt settlement team is not the right way, banks should find different option.

good swati

bank should find other ways to recover debts from debtors, but power of muscle is not correct.

Its a barbariyan practice. For that, we can borrow money from pawn-broker than a banker. This practice (called JABTHI) is stopped in tamilnadu long back. Having satisfied that a customer has a potential to repay the loan, the bankers offer the loan.I do not find a banker giving loan to individual just like that. Unless a strong surity / mortgage of asset is given, no bank is providing loan. If it does means, its called favouritism, that they have to handle it; the way it is sanctioned. Otherwise, as per Bank procedure, action is to be taken for collection of money. Banks are, there, to help the needy but not to earn money for Govt ALONE.This includes Cr Card & OD etc.Lot of favouritism plays a role here.

HI SWATI.

GIVING MANY INCENTIVES THE CUSTOMERS TO WOO THEM TO GET LOANS OF VARIOUS SORTS AND USING MUSCLE POWER TO COLLECT DUES IS NOT AN ETHICAL WAY OF DOING BUSINESS.

Yes, Most Banks, especially the private and MNC banks, are indeed using abusive and threat methods with the help of Goondas to recover loan.

Instead, they can talk to the customer and try to reschedule the loan repayment to an easier term. Probably they can offer some kind of respite and holiday period to the customer.

Normally a person (I am talking about a normal middle class individual) defaults because he/she is facing some financial problems. Problems are temporary and are bound to pass away (Maybe a year or so). If the bank understands this and offers some temporary respite in the EMI, maybe reduced EMI or some kind of “holiday period” or both, then the consumer would be happy and would definitely pay up the entire loan along with the interest. Infact, all banks do charge multiple times the normal interest labled as penal interest, recovery charges, etc. This makes the borrower run as far away as possible from the bank.

Whereas, the bank spend money in sending goondas (even on commission based on recovery, it is money spent). This has the following effect –

a. The consumer is against the bank forever. Once his bad time changes and he is back in the money loop, he never would do business with that bank.

For example, I have seen a case where a business man has become multi “corerpati” and not gone back to the bank that harassed him. In 1998 he was a pauper and in 2003 he was a multi “Corerpati”. His finances gradually increased from 1999. Where as the bank went in for a “Goonda Organized” settlement and took just the principle with a small interest.

b. there are cases where genuinely affected people would not be able to pay up and go in for settlement (paying only the principle). Here too the bank looses.

c. it might go to the court where again the bank looses if it is a case of Credit Card (Unsecured Loan).

d. if the defaulter is influential then he would have various mechanism to counter the threat of the goonda agent.

The best way for a bank to handle the defaulter is to engage him in a decent conversation and help him by rescheduling the loan.

Of course, in some cases the bank employee (especially in the legal department) would be “Hand in Glove” with the collection agent in sharing the commissions for referring cases to the collection agent.

Working as the bank employee or administrator does`nt proved to be the honest and correct decission chooser of alternatives.

Different people have different thought and follow their modudus operandi.

Goondaism with ordinary simple people might be easy to recover loan then why not the same policy is adopted with the influencial big business fellow or the politicians or even Reputed polished goonda`s. Mojor more then 70%  debt and NPA`s are generating at these segment. I think one should hire more powerful gunda`s , but how to ???? Even they hike the loan principles as the assets or balance sheet valuated are rocket high prices ??

But simple and easy service employee is target. Even some time due to wrong punching error entries in the system, the geniune loanees face goondism. Will bank pay them for their mental harrasment, trouble and damages. Loan can be failed anytime by any one, it depends on liquidity positions and income positions of loanees. The main thing need look into the integrity.

@ If experiance highlight / tells us the Recovery agent Goonda`s business is having a scope of income.  Keeping the future educated, growing economy of india and loan book size. We must concentrate to open NEW PG or Diploma or Masters in GOONDA TRANING PROGRAMMES at various afficialted Educational Centres. The future seems to be good ?????

Why not their is a credit rating open to the loanees ?? Feild employee or loan feild sales can easily know the goodwill and integrity of their clients, but the target need to meet their job ? Hence bad loans........

Once upon a time, I met with the compliance officer of the reputed oldest international Pvt. bank.

On the conversations with them, I learnt that the bank deposits 000`s and 000`s cheques each month for the deposited client PDC with them against secured loans. Assets and car loans PDC`s are quite secured in their terms.

Now, they said they intntionally want the cheques to get bounced atleast twice. Really, But why ??? Each bouncing charge is Rs. 450 /-, there fore if 1000 cheques bounced the revenue per month is 4.5 lacs. Twice is 9 lacs. Hence the target revenue comes to near about 70% if some cheques cleared (normeally gets it).

There fore the whole departments cost is free. If the client further fails with bankrupt or non payment, They will either follw the gooda recovery practice or auction the asset.

Really, a fantastic way to manage assets and to generate revenue for Bank ??

Shooting oneself in the head will get rid of the brain tumour; but that is hardly a cure. When one allows use of abusive and goonda tactics for collection by banks, then one opens up a pandoras box of problems.Where is the end to that kind of logic. If that logic is valid then when your friend or colleague doesnot return the money he borrowed in an emergency on time, you have the right to beat him up! Every driver in india has then the right to beat up another driver who disobeys the driving rules!

No I am not trivialising the question. What I am trying to point out is that when we allow individuals or institutions to behave as a law unto themselves - where you give them penal power - then all disorderly behaviour becomes legitimised.

NO! BANKS CANNOT USE SUCH PRACTICES NO MATTER WHAT THEIR LOSS. THE LAW HAS PROVIDED ENOUGH RECOURSE FOR THEM TO RECOVER THEIR MONEY. IF BANKS PRACTICE SUCH TECHNIQUES, THEY MUST BE FORCED TO PAY DAMAGES TO THE VICTIM / DEFAULTER.

CIVILIZATION IS ONLY AS CIVILIZED AS EACH AND EVERYONE OF US MAKE IT.

I agree with jyoti & vipin! if you are running behind the customer to provide loan just for your commision or target then it is no maore suitable to use abusive lang. EMI movie clear all doubts about what private sector banks are doing for earning interest & what after non recovery of debt......... 

Mr. Veejay Bhatia (on the lft side of me or debate)) describes the public is cheating their own money when it go as a loan to individual.

When a customer deposit money with bank. Bank act as a custodian to safeguard the assets. Its not compulsion to provide loan.

If the custodians distribute the money freely to loanees. Why not you then directly ??? at least you can predict better interest rates, sir !!

These bankers are playing with public money and economy, for there own hikes in pockets by showing the debt free result at the top management level.

If Indian govt. legel policy does not suit to recover money or they can` t manage too secure the loss, they must not provide the loans ?

There are conservative banks too who dont provide easy loans. But few run behind and sells loan at huge commisions for huge interest?

If consumer pays huge interst for loan, what the formula they make their self viable to repay the loan back to the bank.

I came through the senior management employee of top pvt. corporate banks like ICICI confirmed to be 20 % of npa from the asset of 10000 crores under him. The npa are not accounted as for to show the neat and clean balance sheet. The ceo`s are taking the benefits of balance sheets and hikes for their own pockets.

In my opinion, using muscle power is not a good way to settle the debts. Sometimes situation becomes so serious that people may lose their life.This shows that the institution or bank has no concern for its customers.

On one hand banks come running behind the customer to take loans & then collect it they use muscle power. Is this a reasonable way of doing business?