Introduction
The housing finance sector has witnessed radical changes in recent times in all spheres of its activities which include the recovery mechanism implemented by Housing Finance Company (HFC) to ensure that the monies owed to the HFC are recovered from the erring borrowers.
As a matter of general practice and for the purpose of recovery, the responsibility of recovery is sometimes conferred on “Recovery Agents/Collection Agencies” who are primarily engaged for this specific purpose and on whom the sole responsibility is to facilitate collection of the amount receivable from these erring borrowers.
However, it has come to the fore that on account of lack of experience & training, setting of stiff recovery target and/or offer of high incentives/commissions etc. entice the Recovery Agents /collection agencies/authorized representatives (employees of HFC or designated representatives) to use intimidating and questionable methods which have led to a spate of events wherein the borrower’s have been harassed to the extent of committing suicide.
Taking serious note of the reports on the high handed action, Reserve Bank of India (RBI) has come out with a draft guideline for engagement of Recovery Agents / Collection Agencies by Banks. On similar lines National Housing Bank (NHB) has prepared a guideline for engaging of Recovery Agents /collection agent by HFCs to control the occurrence of such uncivilized and unlawful process of recovery and further to reinstate confidence amongst the borrowers.
Objectives & Highlights
At the core of the issue is the sincere endeavor of the regulator to ensure formulation and adherence of strict norms for recovery by the RAs/collections agencies/authorized representatives (employees of HFC / designated functionaries).
The guideline encapsulates amongst others, the following parameters:
- Evaluation of the process of engagement along-with imparting of proper training to the RAs/Collection Agencies/Authorized Representatives (hereinafter referred as RA for convenience);
- Contracts to RAs & others do not induce adoption of uncivilized and questionable behaviour or recovery process;
- Transparency, by notifying the borrowers to the extent possible of the engagement of RAs and the process thereof;
- Ensure that the recovery process strictly abide by the codes pertaining to collection of dues;
- Introduction of mechanism whereby the borrower’s grievances with regard to the recovery process can be addressed;
- Promote a fair and cordial relationship between customer, the intermediary/ies and the Company; and
- last but not the least refrain/restrict degeneration of society on account of the unlawful, unreasonable and irresponsible mechanism adopted for collection of dues and thereby foster confidence in the society and the system.
Application of the Code
SHCL on its part lends money responsibly after ensuring (to the extent possible) that the applicants/borrowers have the capacity to repay the amount advanced.
The company currently does not seek the services of RAs/external agencies for the job of collection of over-dues which alternatively is satisfied with the help of the employees of the company. Nonetheless, in keeping the long term perspective of the issue the company will ensure implementation of the “Guidelines for Recovery Agents” which is the responsibility of the entire organization.
Stages of Identification, Engagement & Termination of RA
- The company will put in place a procedure for engagement of RAs which shall be structured to cover the process of identification of the entity (firm/company/individuals) involved in the recovery process, verification of antecedent of their employees, past record, experience etc. The process of finalization of a RAs shall be monitored at the highest level at Corporate Office and periodically reviewed.
- Imparting of periodic and continuous training to handle the borrower with care and sensibility, their responsibilities and limitation with respect to hours of calling, privacy of customer, decency & decorum, resolution of differences in mutually acceptable and orderly manner.
- Once implemented by Indian Banking Association (IBA), to employ/engage only such personnel/agencies who have undergone the certificate training course on Direct RAs conducted by the Indian Institute of Banking and Finance (IIBF) with minimum 100 hours of training. Further ensure that all pre-existing RAs avail the training within 1 (one) year of implementation.
- Provide the RAs with proper identification card / authority letter / copy of notice for the purpose of easy identification and convenience of the borrower.
- Update the website with the details of the RAs engaged by the company.
- Contracts with the RAs should refrain from inducing them to resolve to uncivilized, unlawful and questionable behaviour, act or recovery process.
- The above parameters shall even cover (to the extent required) the employees of the company who have been conferred the task of collection from borrowers.
- In the event of termination of the agreement/contract with any RAs, the same shall be publicized for the information and convenience of the borrowers.
Commitment to Customers
The Company shall ensure that monies owed by the borrower/s are recovered while maintaining their dignity at all times and within the framework of the law of the land. Further that all dealings with customers rest on ethical principles of integrity and transparency.
In essence we will be “FIRM & FAIR” in our loan recovery process and mechanism.
To give effect to the loan recovery guidelines which at SHCL shall rest on the pillars of fairness, transparency, best of corporate practice & ethics and firmness, the following broad parameters have been identified:
- Correctness of Information
- The company shall make every attempt to ensure correctness of information regarding the outstanding position of the customer prior to making contact with the customer regarding recovery of outstanding dues.
- Only after the company has ensured to the best of its ability that the information regarding the borrower account is correct will the company contact the borrower through the prescribed means.
- If the borrower produces payment information that is contrary to that on the records of the company, the company will verify such information and revert to the borrower with a confirmation / non-confirmation of the same within a period of 10 (ten) working days.
- Contacting the Customer
- The company shall ensure that the borrowers are made aware of the outstanding position of their loan accounts via either a telephone call or a letter sent to the customer’s address on record.
- Tele-callers calling the borrower will at all times behave in a polite and civil manner and will maintain the decorum and dignity of the borrower.
- All letters addressed to the borrower will follow the tenet of proper business communication and will be moderate and restrained in terms of the language used.
- The company will make a note on record of the borrower’s response to the telephone call or letter and will take appropriate action as per the borrower response.
- In case the borrower cannot be contacted on the telephone even after several attempts or the borrower does not respond to the company’s letter the company reserves the right to send an authorized representative to the borrower’s address on record (either residential or official).
- The representative will at all times behave in a polite and civil manner and will maintain the decorum and dignity of the borrower. All representatives are bound to sign the “Code of Conduct” (Annexure A) that regulates personal interaction with the customer. This relates to
