Use of Force by Banks to Recover Loans

Some banks behave like local financiers to recover their loan amount from the borrower. They harass over the phone, they send their staff home and threaten to humiliate the borrower even after knowing that he or she has a genuine problem. Hence you read about suicides by people who are unable to deal with this kind of harassment. Does the reserve bank of India not have any laws to help the borrowers in times of crisis.

Hi friends.

Banks provide loans to help people in their bad financial conditions but if people will not pay back than banks need to hold a bid to get back their money. This is only option but using force is not good option because India is a developing country and anything like using force make a bad impression on people and threat others to stay away from taking loans.

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.

According to RBI (RESERVE BANK OF INDIA) guide lines use of force to recover loan is not legal. All the banks will survive on people trust, so if the trust is ruins then how banks can do their business and that will create black mark on banks and people trust, after all banks depends on trust, Before the disbursement of loan to any person doing KYC (Know Your Customers) is mandatory by RBI.

Secondly proper verification should be there, the person who has applied for the loan, banks officials should check eligibility criteria and potential and meet the person directly for certain clarification. Banks also do need to send a intimation to the concern person before the premium.

The bank on about customer give loan the return of the bank doing loan recovered.

And if the banks fail to check their customer's credibility thoroughly at the time of sanction of loan then its the bank's fault it should not harass the customer for its own fault. But people should know that banks not meant for charity rather they are a well established financial institutions and work for profit motive.

Hi I am SHUBHAM,

Well people search such a bank that can give them loan and then leave them alone; unfortunately they are unable to find it. Using force by banks to recover loans is not a healthy deed. But people should know that banks not meant for charity rather they are a well established financial institutions and work for profit motive.

RBI has declared the use of force for loan recovery as illegal. But, RBI should make its rules of loan recovering flexible so that both the interest of the bank and its customers is judged and protected.

Acording to RBI (RESERVE BANK OF INDIA) guide lines use of force to recover loan is not legal. All the banks will survive on people trust, so if the trust is ruins then how banks can do thier business and that will create black mark on banks and people trust, after all banks depends on trust, Before the disbursement of loan to any person doing KYC (Know Your Customers) is mandatory by RBI.

Secondly proper verification should be there, the person who has applied for the loan, banks officials should check eligibility criteria and potential and meet the person direcrly for certain clarification. Banks also do need to send a intimation to the concern person before the premium.

Use of force by banks to recover money is not only illegal but also unethical, and no body can take law into their hands.

Bank lends money collected from depositors to loanees and any default in repayment affects the money available for further lending. Hence bank need to recover the money lend and the borrowers have an obligation to repay. But sometimes there are instances beyond the control of borrowers due to which they are unable to repay and in such cases banks have to give time or reschedule the loan or can resort to lawful means.

Again banks resort to such force only in respect of small farmers but in respect of big borrowers the same banks give compromise and negotiated settlements etc. Banks should adopt a uniform approach with regard to recovery.

Banks can avoid this kind of a situation if banks at the time of granting the advance exercise more cautious approach. Many a times sanction after protracted visits by prospective customers is one of the reason for the borrower not paying in time.

Banks have got a a duty to educate its customers on the benefits of availing loans only to that extent which they can comfortably repay.

Banks have to comply with the banking codes.

If banks use force repeatedly,0ver a period of time the good borrowers may not be willing to avail loans which will ultimately affect the business of banking itself.

Banks these days provide loans to its customer just without any tight information of the borrower. Thus, it creates a situation of inconvenience for them to recover it. In such situation the institute is left with with no other option other than to use some malice means. As such the money the borrower borrowed is the money of other individual in rotation basics. Therefore it has to be endowed with such power to recover it by any means.

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.