No recovery agents for loans under Rs10 lakh

Under new draft rules, dues under this limit will be decided by Lok Adalats

MUMBAI: After the Mumbai police, the Reserve Bank of India (RBI) is now leaning on banks to rein in their loan recovery agents. Draft guidelines put out on Friday say that banks should not send in recovery agents for loan overdues below Rs10 lakh.

According to the draft, which will be enforced after banks send in their inputs, cases below Rs10 lakh should be decided by Lok Adalats – a suggestion that bankers may not be too happy about. “The move may delay recovery for banks and increase bad loans in the short term,” a banking analyst said.

The RBI wants banks to stop using strong-arm tactics while recovering loans. The Indian Banks’ Association and the Indian Institute of Banking and Finance (IIBF) will work out a 100-hour certificate course for recovery agents. Only those who clear this course can be used as recovery agents.