Regulating Recovery Agents And Collections: A Statutory Code To End Harassment In Bank Debt

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Parvesh Mushraf AF, LLM, Tamilnadu National Law University

ABSTRACT

The systemic issue in Indian bank debt recovery where the important financial stability goal of NPA resolution often clashes with the ethical protection of borrowers in vulnerable groups. The core tension lies in- between the hard statutes like the SARFAESI and RDB Acts that grants efficient recovery powers to borrowers and the soft law mandates Reserve Bank of India’s Fair practices code that govern the conduct of the agent. The dependence on non-statutory guidelines creates a gap in enforcement, failing to impose special penal deterrents directly upon third-party recovery agents. Landmakr cases like ICICI Bank v. Shanti Devi Sharma and Ors, confirm this failure by condemning the practices as non-legal, proving the market pressure overriding the Fair practices code. Also, the victims of harassment from recovery agents are forced to seek burdensome, post-facto redressals under the general Indian Penal Code, now, Bharatiya Nyaya Sanhita. The absence of enhanced Statutory Debt Collection Practices Act modelled on the specific definitions, license requirements and civil liability provisions found in US Fair collection debt practices. The SDCPA aims to convert the regulatory focus from vicarious liability to individual accountability, which ensures strong statutory protection for borrowers and limiting the coercive powers of agents.

Keywords: Debt Recovery and Financial Stability, SARFAESI Act and RDB Act, RBI FPC, Recovery Agent Liability, Borrower Protection, Statutory Debt Collection Practices Act.

40. REGULATING RECOVERY AGENTS AND COLLECTIONS- A STATUTORY CODE TO END HARASSMENT IN BANK

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