Private banks and non-banking financial companies (NBFCs) are facing severe criticism for allegedly flouting the Reserve Bank of India’s (RBI) guidelines on ethical debt recovery practices. Recent reports have highlighted concerning incidents involving harassment and privacy breaches by recovery agents, raising questions about the adherence of institutions like ICICI Bank, Kotak Mahindra Bank, and NBFCs such as Fibe to RBI regulations.

Case of Harassment Sparks Outrage

A recent case in Uttar Pradesh has brought these unethical practices to light. A victim filed a complaint with the Cyber Crime unit after receiving multiple harassment calls from an ICICI Bank executive. Shockingly, calls were also made to the victim’s acquaintances, including neighbors, relatives, and service providers, demanding repayment in an abusive manner.

The victim alleged receiving over 300 WhatsApp calls and 500 phone calls in a single day, many of which occurred outside permissible hours as outlined by RBI guidelines. Evidence supporting these claims has been submitted to authorities, along with a written complaint at the nearest police station.

How Privacy Is Breached During Debt Recovery

According to sources within recovery agencies, banks extract contact details from borrowers’ financial records, such as UPI payment histories. These details are then used by recovery agents to contact third parties connected to the borrower—often without consent—leading to harassment.

An insider from a recovery agency revealed that confidential customer information is routinely shared with agents, enabling them to bypass privacy safeguards and escalate pressure on borrowers. Recovery agents reportedly use intimidation tactics, including threats involving legal action or police intervention, to coerce repayment.

RBI’s Guidelines on Debt Recovery

The Reserve Bank of India has established strict guidelines to ensure ethical debt recovery practices:

• Privacy Protection: Recovery agents must maintain confidentiality regarding borrowers’ debts and avoid contacting unrelated third parties.
• Restricted Contact Hours: Calls can only be made between 7 a.m. and 7 p.m., with no harassment through WhatsApp or social media platforms.
• Humane Treatment: Borrowers must be treated with dignity, avoiding abusive language or threats.
• Monitoring Mechanisms: Banks are required to record all interactions between recovery agents and borrowers to safeguard against misconduct.

Despite these regulations, private banks like Kotak Mahindra and ICICI have faced penalties for non-compliance in the past. In October 2023, Kotak Mahindra Bank was fined by the RBI for failing to ensure ethical behavior by recovery agents and violating customer service norms.

Impact on Borrowers’ Mental Health

Instances of harassment have led to severe mental distress among borrowers. In extreme cases, victims have reportedly died by suicide due to the pressure exerted by aggressive recovery tactics.

A senior banking official commented: “This is a common practice among private banks. Unfortunately, most borrowers don’t report these incidents due to fear or lack of awareness about their rights.”

Borrowers’ Rights Under RBI Guidelines

The RBI outlines several protections for borrowers during debt recovery:

• Right to Privacy: Debt details cannot be disclosed to third parties or discussed publicly.
• Right to Humane Treatment: Recovery agents must respect personal space and avoid harassment or intimidation.
• Grievance Redressal Mechanism: Borrowers can file complaints if they face unfair treatment during debt recovery.

Call for Action

As cases of unethical debt recovery practices continue to emerge, it is imperative for borrowers to understand their rights and report violations promptly. Regulatory bodies like the RBI must enforce stricter penalties on institutions that fail to comply with guidelines, ensuring that borrowers are treated fairly and respectfully during repayment processes.

The names of victims and sources have been kept confidential for privacy reasons.