RBI warns ban on recovery agents

The Reserve Bank of India on Thursday asked banks to take full responsibility for their recovery agents to avert disputes and litigations arising out of high-handed loan recovery practices and warned of a ban on their deployment if found engaged in abusive practices.

"The banks are advised to ensure that contract with the recovery agents do not induce adoption of uncivilised, unlawful or questionable behaviour or recovery process," the apex bank said in its guidelines on engagement of such agents.

It cautioned banks that the rise in the number of disputes and litigations related to recovery practices in the recent past and the consequent adverse publicity could result in "serious reputation risks" for the entire banking sector.