Banking Ombudsman charged ICICI, HDFC for violating norms on recovery agents

Government informed the Lok Sabha that HDFC and ICICI Bank have been violating RBI guidelines on engagement of recovery agents for loans the banking ombudsman has received several complaints against both the banks.

Finance Minister Pranab Mukherjee said in Lok Sabha, "RBI has reported that 120 complaints had been received by 15 Banking Ombudsman Offices in year 2009-10 regarding non-observance of RBI guidelines on engagement of recovery agents by private sector banks."

He said, "Further, it has also been reported that HDFC Bank Ltd and ICICI Bank Ltd have reportedly violated the said guidelines."

Regarding the remedial measures, he said, RBI had issued detailed guidelines to banks on engagement and training of recovery agents. Banks were instructed to ensure that the recovery agents were provided proper training to handle with care and sensitivity particularly in aspects like hours of calling, privacy of customer information etc.

He added banks have also been advised to make sure that the contracts with the recovery agents do not encourage adoption of uncivilized, unlawful and questionable behavior of recovery process.


Finance Minister further said that the banks, being responsible for actions of their agents have been advised to ensure that the agents hired for recovery of dues should strictly follow the guidelines and instructions issued by RBI, including the Banking Codes and Standards Board of India.

He added, banks engaging recovery agents have been instructed to do a periodical review of the mechanism to learn from the experience to bring improvement in the mechanism.

As per the Banking Ombudsman Scheme, 2006 as amended in 2009, the Ombudsman has the power to award compensation up to Rs 1 lakh to those harassed by the agents.

In a reply of another question, Mukherjee said the Khandelwal Committee in its report has said that if public sector banks have to truly make its position strong in a competitive environment, wages have to be set in co-relation with the performance of staff and profitability of banks.
The committee (headed by former chairman of Bank of Baroda A K Khandelwal) had recommended that PSBs (public sector banks) might be given freedom to negotiate wages and service conditions to create a better fit between compensation and performance.