This refers to the editorial “Banks and muscle power” (June 6). The use of muscle power by banks to recover their loans is unacceptable. The increase in the number of default cases has forced commercial banks to think of alternative but unhealthy methods to recover their loans.
Before the SARFAESI Act was enacted, bank managers used to meet defaulting borrowers after office hours and persuade them to adjust the irregularity. Their efforts bore fruit. But today, secure in the feeling that the Act will help them, most managers do not move out of their air-conditioned cabins.
When they find that even the SARFAESI Act does not help much, they seek the help of outside elements to coerce the reluctant borrowers to repay.
Managers take adequate precautions neither while granting loans nor after disbursement. The art of lending has been thoroughly debased; so has been banking as a profession.
Outsourcing loan recovery to agents on a commission basis will not work beyond a point. Recovery agents are neither responsible for results nor accountable to anyone. They are only interested in their short-term gains.
By adopting coercive methods, they bring a bad name to the banks that employ them. There is no substitute for direct approach by banks for recovery.
Recovery of loans by bullying the borrower is unacceptable. It tarnishes the image of the banks that employ recovery agents and, in the long run, will have an adverse impact on their business.
Naval Kishore Pandey,