Use of Force by Banks to Recover Loans

Checking for credit worthiness is not enough at all times. What if I earn enough now but fall into difficult financial times during the time I am paying off a loan/due? Medical bills run into lakhs, so can a loss in business or even a job cut. I am NOT talking of INTENTIONAL defaults here. What can "good credit worthy" customers do when they fall into bad times? Credit cards etc only spiral the total dues. If a cstomer cannot pay, there are late fees, finance charges, overlimit charges, service charge etc. That is not all. There is even a service charge for adding late fee to the a/c. What can a person do in such a situation? There are no facilities where a customer can request for a period of relief from paying back loans/credit dues. I have not come across a single bank in India which has such a relief period.

As a for profit organisation, banks should be responsible for the defaulted loans they issue, as an investor is responsible for a bad investment. If one purchases stock and loses money, one has no right to assault, through either legal or physical means, the institution from which they purchased the stock in order to gain financial restitution. When a loan is issued, the bank accepts a degree of risk. If their customer defaults on a loan and cannot supply the required funds, for whatever reason, the bank has accepted the risk and must therefore also accept the financial loss. The defaulter will have to suffer legal ramifications for dishonoring the arrangement (i.e. Bad credit). There is absolutely no justification for the physical or verbal harassment of a person because they are UNABLE to pay their debts.

Though there are many options, using force is more viable that too for cheaters who has gone abscond. Proper customer evaluation mechanism should be in use to prevent this case at the beginning stage. Risk profiles should be created and should be cautious with customers placed under high risk category. Wat if the person with high credibility becomes bankrupt? there's no other way than to own the security pledged by the defaulter. But if it's an unsecured loan which is given on the will of the manager judging the customer's credit worthiness? The only way is to recall by force but it may have negative impacts which may make the customer to take hasty decision like ending his life. So it's up to the management to make the advance after looking at various security concerns.

Of course banks should not use force to recover Bank's lent money. Bank has various other legal recourse to recover Banks fund. First Before sanction of the loan Bank should have assessed the repayment capacity of the borrower. Have done Due Diligence? Find out the reasons why the borrower is unable to pay. Whether he will be in a position to repay the loan or not. If not give the chance for settlement rather than using force for recovery of Bank Loan. People have trust in Banks and deposit their hard earned money. On the other side they take help from the Bank by getting loan for their needs. There are a very few borrowers who have capacity to pay but unwilling to pay a stringent action be initiated against them but within legal framework by not using the force.

The role of a bank in lending is likened to that of a BRIDGE across a river; the bank takes money from the surplus unit and give to the deficit side, this role is based on trust as the fund belongs to the public. Therefore, failure on the part of a borrower to repay a loan is a breach of public trust.
It is noteworthy to mention that the release of funds to any borrower at any point in time is a privilege as there are many others who also require the same fund and as such this should not be abused by borrowers. For purposes of sustainable trust and integrity and for economic growth, banks must ensure that every fund given out as loan must be recovered, if need be, some level of force may be applied, depending on a given situation.

According to me banks really should not use forcible things to recover the loan. Banks should assess the condition of the borrower, why he was failed to pay the loan. On this basis banks should decide what to do to take back amount, whether he should be given second chance or some relaxation in terms, and if loan was not being paid intentionally then bank can use whatever it thinks like seize the property, etc.

Most of the population don't consider terms and condition regarding loans that's why they have to face problem while repaying the loan.

And agents sell the loan with making fool the bunches of people knowing the facts that if they will not repay the loan there are lots of way can be used to recover the loan.

Banks who will be using forcible method to recover a loan might create a very bad impression over other people who observes the whole scenario while some random guys are trying to recover debts forcefully. P=People who could be a prospect client in future of the same bank may change their mind watching and hearing about such demeaning act.

We all know that Generosity and Hospitality is making an entrance in the banks over the years and image rebuilding is kept on a priority. Hiring local mob and granting them to authority to use force will only result in atrocity. Banks should rather check the costumers credibility of repaying loan and take collateral to bear the losses if in case the costumer fails to pay it back.

I do agree that,use of force to recover loans is not desirable banking practice.The term banking means accepting deposits from public for the purpose of lending in a profitable manner.When banks asset becomes NPA banks fails to recover it by soft skill like public notices, legal notice ,it may be permitted to use trained,skilled recovery agents with the prior permission of higher banks officials . After all its public money ,bank has every right to recover its assets. But, rampet use of recovery agents should be banned,it is not desirable in any financilal system and also crital to the brand image of the Banks.Before sanctioning of any loan Banks should analyse its creditwotiness to avoid auch type of situation.

There is a system for everything, & it should go according to that. Bank are working as a mediator to provide loan to the needy ones, that money which bank provide from their treasure is the money of their customers. Not receiving money on time would cause huge problem to the whole system, not recovering money on time ultimately affect the bank's credibility & banks have to bear the loss, which somehow does affect government's treasure.

For latest instance business tycoon Vijay Mallya has betrated banks by not returning borrowed money which is almost more than INR 10k crore, who will bear this huge lose?

So there is no doubt, bank should use force to recover loans in a defined systematic way.

Hello friends,

Your point of views are very nice. I learned a lot. In my view, the bank is having trust on public and lending the money, not only they are believing the trust they asked for proofs, if they are sufficient with collateral security. As my friends said it is not a charity right, if the loan is paid back then only again money will get circulated.

So the people who roaming like anything to get the money they should take initiative to repay the loan at the same time. It cannot be forced but people should itself think otherwise they will lose their security simple. So if is paid properly they only they will get it again. If bank it utilized in a proper way everything will be fruitful.