Tactics to Recover Banks Loans in India Raises Ethical Concerns*



Case Code : CLBE001
Publication date : 2008
Subject : Business Ethics
Industry : Banking and Financial Services
Length : 03 Pages


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Abstract: ICMR India ICMR India ICMR India ICMR India RSS Feed

Customers and the public were crying foul at the increasing instances of high-handedness by banks’ recovery agents. They alleged that the banks were hard selling their financial products, but in cases of default by customers they were using unethical methods to recover their loans. The policy makers too woke up to this problem and issued guidelines and directives as a crack-down on the banks adopting unethical tactics to recover their loans.


Ethics and social responsibility.
Management Control.
Customer relationship.


In September 2007, Prakash Sarvankar, a customer of India's second largest bank, ICICI Bank, committed suicide after being publicly humiliated by the bank's loan recovery agents. ICICI Bank was compelled to pay Rs. 1 million in the form of a fixed deposit as compensation to the victim's family.

In a similar incident, another customer Yadaiah from Hyderabad died of a cardiac arrest after the recovery agents forcibly tried to recover a personal loan of Rs. 15,000 from him. ICICI Bank ended up paying a compensation of Rs. 0.3 million to the victim's family. In November 2007, the Delhi State Consumer Dispute Redressal Commission fined ICICI Bank Rs. 5.5 million after ICICI Bank's recovery agents hired goondas to recover their loan amounts.

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Key words:
Hard selling, financial products, unfair trade practice, Reserve Bank of India, RBI, Consumer Commission, ICICI Bank, recovery agents, loan defaulters, Housing Development Finance Corporation, HDFC, Indian Banks Association, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, SARFAESI Act, Security Interest (Enforcement) Rules, 2002, Lok Adalat, Indian Institute of Banking and Finance

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