There have been complaints from time to time, of Micro Finance Institutions from the NBFC space using coercive or aggressive measures for debt recovery after a loan was taken. Of course many years ago, even some banks were accused of adopting similar measures.
How the RBI is intervening in this regard?
The Reserve Bank of India (RBI) has taken into cognizance these aggressive or coercive methods that are being adopted.
Also, recovery should normally be made only at a central designated place. What this means is that individuals concerned with recovery cannot land-up suddenly at the house of the person who has taken the loan. Field staff shall be allowed to make recovery at the place of residence or work of the borrower only if borrower fails to appear at central designated place on 2 or more successive occasions.
Why this is a really good measure?
This is a really good measure, because many individuals have been harassed in the past to recover their loan outstanding through very aggressive measures. This has now been bought to the attention of the Reserve Bank of India, which has now intervened in the matter.
Banks no longer use very coercive measures for debt recovery, though some of them have been saddled with a pile of debt on their books.