 "Allahabad HC summons ICICI Bank chairman over employing recovery agent")
The Allahabad High Court has summoned the Chairman of ICICI Bank to ‘personally address’ concerns regarding the bank’s use of recovery agents in a loan case, despite a Supreme Court prohibition, according to a report by Bar and Bench. The directive comes in the wake of a legal battle involving a defamation case against bank officials.
Justice Prashant Kumar of the Allahabad High Court issued the order on June 15, instructing the ICICI Bank Chairman to file a personal affidavit detailing the bank’s actions. The chairman must explain how the bank engaged recovery agents and pursued a civil suit against a borrower, Rahul Singh, despite the full repayment of his loan with interest, the court said.
“He may also state as to how his Bank was still taking the services of the recovery agents when the same was clearly barred by the Supreme Court,” Justice Kumar noted.
Background of the case
The case centres around Rahul Singh, an American citizen and Overseas Citizenship of India (OCI) cardholder, who had taken a home loan of Rs 7,80,000 from ICICI Bank’s Noida branch in 2002. Despite settling the loan amount with interest and foreclosure charges in 2007, Singh was erroneously listed as a defaulter in the Credit Information Bureau (India) Limited (CIBIL) rating, a critical credit score in India. Furthermore, the bank filed a civil suit against him in 2014, exacerbating the issue.
In his petition to quash the defamation case, Singh revealed that recovery agents employed by the bank in 2013, harassed him at his residence, making derogatory comments and causing significant distress. This prompted Singh to initiate defamation proceedings against the bank officials.
In a separate case in 2007, the Supreme Court had ordered the bank to not use recovery agents to recover the Bank loans. Additionally, the Reserve Bank of India (RBI) had also laid down comprehensive rules for the hiring of recovery agents by banks.
More From This Section
RBI guidelines on debt recovery agents
In the early 2000s, media reports highlighted numerous instances where debtors faced harassment and physical assault by recovery agents, who were often derogatorily referred to as ‘goons’.
Responding to these concerns, the RBI established guidelines in 2007 to regulate the conduct of debt recovery agencies, addressing growing concerns over aggressive and sometimes violent collection practice by these agents.
These guidelines included mandatory 100 hours of training and passing a written examination on debt recovery before recovery agents could be employed.
The RBI, at the time, also emphasised that outsourcing any activity, including debt recovery, did not absolve banks of their obligations. The RBI guidelines explicitly prohibit any form of intimidation or harassment, whether verbal or physical, in the process of debt collection. This includes actions aimed at publicly humiliating debtors or intruding into the privacy of their families, referees, and friends. Recovery agents are also forbidden from making threatening or anonymous calls or providing false and misleading information.
Supreme Court judgement violation
The Court pointed out that the Supreme Court had explicitly barred the use of recovery agents by banks in a ruling passed six years prior to the incident. The High Court demanded an explanation from the ICICI Bank Chairman on how the bank continued to contravene this judgement in 2013.
The High Court has scheduled the next hearing for July 10, during which the ICICI Bank chairman is expected to provide an explanation and the required affidavit.