Thirty-four-year-old Pallav, after quitting his job as a coal miner in Meghalaya, decided to become a loan recovery agent in 2012 on the recommendation of an old friend who did the same work. Today, he runs his own collection agency in a small town in Assam, not very far from Guwahati, that recovers loans for public-sector lenders across the state.
Pallav, who asked that his full name not be disclosed for security reasons, advises his employees to be polite and persuasive while talking to borrowers. But sometimes those tactics do not work. “When everything fails, I ask my agents to announce the borrowers’ names on the microphone in their locality.” The practice, he said, is common among the collection agencies in his area.
“If the borrower avoids meeting us repeatedly at their residence, we try to meet them in their office or sometimes even call their relatives and inform them about the situation,” he added.
Such practices are prevalent despite being in violation of the Reserve Bank of India’s Fair Practices Code, which asks collection agencies to train their field staff in “inculcating appropriate behaviour towards borrowers without adopting any abusive or coercive debt collection or recovery practices.”
Pallav is not alone in pushing the boundaries to collect overdue loans.
According to a public interest litigation filed by advocate Vishal Tiwari at the Supreme Court, lending institutions often “adopt illegal and violent methods” to recover loans. The PIL cites an incident that happened in August last year when a group of collection agents stopped a private bus, carrying 34 passengers, near Agra because the bus owner had not paid his loan instalments.
In the most extreme of such cases, the Hyderabad police arrested six people in December belonging to online lending firms Onion Credit and Cred Fox Technologies, after two borrowers committed suicide because of alleged coercive recovery practices.