SC tells banks: Be polite to loan defaulters

New Delhi: The Supreme Court has taken a serious note of growing complaints of extralegal methods used against loan defaulters. The apex court has cautioned banks to respect the law of the land and rein in their recovery agents.
The court has told banks and financial institutions to strictly follow the 10-point guidelines issued by RBI mandating recovery agents to be scrupulously polite in their dealings with borrowers who have defaulted.
The court issued the order in a case relating to a young man living in Sriniwaspuri in south Delhi who committed suicide allegedly after he was harassed by recovery agents.
The court said banks should follow a more civil method of recovering dues. The Times of India has quoted the bench, consisting of Justices Tarun Chatterjee and Dalveer Bhandari, as warning financial institutions that they are bound by law and recovery of loans or seizure of vehicles can only be done through legal means.
The Delhi State Consumer Commission too has, in a recent order, stated that unless a bank or a financial institution is equipped with a court order to repossess a vehicle which it has given on loan, it has no authority to go to the residence of the borrower to take away the vehicle by force. This was observed by the state consumer commission in a recent order.
The commission observed that no financier or bank had the authority to forcibly take possession of the vehicle as the loan agreement or hire purchase agreement were civil contracts and therefore had to be enforced through civil remedy, that is, through intervention of the court.