Bank Management

Modes of debt recovery other than normal debt recovery procedure

(1) Where a certificate has been issued to the Recovery Officer under Sub-section of section 19, the Recovery Officer may, without prejudice to the modes of recovery specified in section 25, recover the amount of debt by any one or more of the modes provided under this section.

(2) If any amount is due from any person to the defendant, the Recovery Officer may require such person to deduct from the said amount, the amount of debt due from the defendant under this Act and such person shall comply with any such requisition and shall pay the sum so deducted to the credit of the Recovery Officer: Provided that nothing in this sub-section shall apply to any part of the amount exempt from attachment in execution of a decree of a civil court under section 60 of the Code of Civil Procedure, 1908 (5 of 1908).… Read the rest

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Normal debt recovery procedure followed by banks

Normal debt recovery procedure will generally apply to the debtors who are willing to pay the dues with normal recovery process.   Based on the regulatory guidelines of procedure of tribunal on debt recovery, following procedure may be outlined for such recovery.   However the recovery agents should follow the bank-specific debt recovery procedure as advised by their principal. Below are given the main rules for making telephone calls and visit to the debtor for recovery of dues:

1)     The recovery agent has been authorized by the bank to collect the past due debt from the particular customer.

2)     The customer has been notified by the bank of the details of the recovery agent for collection of the past-due debt.… Read the rest

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Procedure of Tribunal on Debt Recovery

1) Application to the Tribunal:

(1) Where a bank has to recover any debt from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction By Act 1 of 2000, sec. 8 (w.r.e.f. 17-1-2000).Subs. by Act 1 of 2000, sec. 9, for section 19 (w.r.e.f.17-1-2000).

(a) the defendant, or each of the defendants where there are more than one, at the time of making the application, actually and voluntarily resides or carries on business or personally works for gain; or

(b) any of the defendants, where there are more than one, at the time of making the application, actually and voluntarily resides or carries on business or personally works for gain;

(c) the cause of action, wholly or in party, arises.… Read the rest

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Debt recovery processes followed by Indian Banks

Banks lay down their policy and procedure for collection of past due debts in conformity with the legal and regulatory framework. The banks will in particular, abide by:

  • The Reserve Bank of India(RBI) directives on recovery of debt, including recovery agents engaged by the bank and,
  • The Model Policy on collection of Dues and Repossession of security framed by the Indian Banks’ Association.

A bank will normally incorporate its policy and procedure for debt recovery in the arrangement entered into its recovery agents.   In terms of the recovery management agreed with the bank, the recovery agents should adhere to the policy, procedure, etc.… Read the rest

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The Debt Collection Policy (Loan Recovery Policy)

The debt collection policy (recovery policy) of the bank is built around dignity and respect to customers.   The Bank will not follow policies that are unduly coercive in recovery of dues from borrowers.     The policy is built on courtesy, fair treatment and persuasion.   The bank believes in following fair practices with regard to recovery of   dues from borrowers and taking possession of security (properties / assets   charged to the bank as primary or collateral security) (known as security repossession) and thereby fostering customer confidence and long-term relationship.

The repayment schedule for any loan sanctioned by the Bank will be fixed taking into account the repaying capacity and cash flow pattern of the borrower.  … Read the rest

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Guidelines for Preparing a Proper Strategy for Debt Recovery

Devising a strategy helps in achieving a set goal or objective.   Recovery agents should therefore devise a strategy for debt recovery.   The following guidelines would help in preparing proper strategy for debt recovery.

  1. The collection process should be compliant to the bank-specific recovery norms and also regulatory guidelines.
  2. The collection timing should be synchronized to the cash inflow pattern of the debtors: For example, recovery from salaried employees should be timed when salary is received by or credited to the debtor’s account, normally at the moth-end.   In case of SME borrowers the effort should coincide with cash flow on account of sales.  
… Read the rest
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