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By admin on December 31st, 2010

The government today said at least two private banks â€" ICICI Bank and HDFC Bank â€" had repeatedly violated the guidelines of the Reserve Bank of India (RBI) on engagement of recovery agents.

In response to a question in the Lok Sabha, Finance Minister Pranab Mukherjee said 120 complaints had been received by the banking ombudsman regarding violation of the norms during 2009-10.

He, however, did not say what action was being contemplated by the government and only listed the action initiated by RBI, the Banking Codes and Standards Board of India and the Banking Ombudsman Scheme, which was amended in February 2009. The amendments allowed the ombudsman to award a compensation of up to Rs 1 lakh in case of complaints arising out of credit card operations of banks.

Besides, Mukherjee said banks had been asked to undertake period review of the recovery mechanism and improve upon them. RBI had issued detailed guidelines to banks on engagement and training of recovery agents. Banks had been advised to ensure the recovery agents were properly trained to handle cases with care and sensitivity, particularly with respect to hours of calling, privacy of customer information, etc.

Banks had been advised to ensure that the contracts with the recovery agents did not induce adoption of uncivilised, unlawful and questionable behaviour of recovery process, he said.

The finance minister also said the banks, as principals, being responsible for actions of their agents, had been advised to ensure that the agents engaged for recovery of the dues strictly adhere to the guidelines and instructions issued by RBI, including the Banking Codes and Standards Board of India.

RBI and the government were forced to act after banks were accused of resorting to unfair means, including the use of musclemen, to recover dues related to outstanding credit card bills and personal loans.