Creditor Harassment Laws In India

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Legal-AdviceAs with most other nations in the world, having an outstanding debt in India will often result in frequent, obnoxious calls from banks and collection agencies attempting to collect on it. These frequent, obnoxious, harassing phone calls and other contacts are frequently in violation of established creditor harassment laws long established in India – but companies violate these laws in the hopes that their victim is ignorant of them or else will not expend the effort to report the violations. Education is the first line of defense against this kind of harassment.

The Working Group on Lenders’ Liability Laws was tasked with examining the issue and deciding what recommendations to make to the Government of India regarding the issue of creditor harassment. On their recommendation, the Bank of India examined a number of prominent financial institutions in the country, their practices regarding debt collection, and how these matters could be improved for all parties; consulting with the government on these matters, the Fair Practices Code for Lenders was introduced to provide guidelines on how financial institutions should act. It is strongly advised that all Indian financial institutions and banks adopt these guidelines for their practices; practically speaking, any institution of reasonable size has done so.

In addition to the Fair Practices Code for Lenders, the Banking Codes and Standards Board of India (BCSBI) established a Code of Bank’s Commitment to Customers that includes some rules and suggestions regarding recovery of dues from customers. While banks are not strictly required to adopt the exact codes as written by the BCSBI and instead adopt their own code, it is expected that these codes will contain standards at least as rigorous as those determined by the BCSBI – that is, any individually crafted codes must keep the bank to a higher standard, never a lower one.

If a bank contracts debt collection out to a third party agent, measures were introduced to ensure the lending bank’s reputation is tied to the actions of the third party. The goal is to prevent the third party from acting in such a way that could damage the reputation and integrity of the lending or card-issuing institution, as presumably those that employ unscrupulous practices would quickly be disavowed by the bank they are working for. All letters originating from a third party debt collection agency must bear the name and contact information of a senior officer at the issuing agency whom the debtor can contact to resolve the debt situation or otherwise comment.

Any bank, non-bank financial company, or any agent thereof should refrain from intimidating or harassing any target of collection efforts. Harassment for these purposes can be considered either verbally or physically, and extends to the debt holder’s family members, friends, referees, neighbors, or anyone else associated with the borrower. Any action intended to humiliate the debt holder publically is barred, as is any effort to intrude on the privacy of the debt holder or anyone associated with him or her. Anonymous and/or threatening phone calls or any other kind of false or misleading representation is similarly not acceptable.

If a debtor feels they have been harassed in some way, he or she has a time period of 60 days in which to air their complaint or grievance; afterward, a statute of limitations prevents or else complicates any action that may be taken as far as redressing complaints for that particular incident. Any card-issuing bank or financial institution must institute a Grievance Redressal department or system, and contact information for that department must be made readily available for discovery. Any bill issued by the institution should contain the name and phone number for the department in the event of customer complaints. Unreasonable delays in the addressing of any grievances brought to the attention of the company are not permitted.

The specific procedures employed by the financial institution, and the time frame allotted for addressing of any grievances aired to the department, should be prominently displayed on the company web site, including the name, address, and phone number of any high-ranking executives at the bank as well as the officer primarily responsible for addressing customer grievances. The bank or non-bank financial institution should employ a system to label complaints as they come in, even if they arrive via phone, so that they may be referenced later and/or followed up on; for example, a complaint number or docket number should be assigned to each communication.

Banks have 30 days from the date of it being lodged to respond to a grievance voiced by a customer. If the complaint does not receive a satisfactory response in this time, the customer has the option to address the Office of the banking Ombudsman for the region to attempt and receive compensation for his or her grievance. The bank or financial institution, in this event, is liable to compensate the customer for the time spent dealing with the problem, for any financial loss experienced from the issue, as well as mental anguish suffered by the complainant resulting from the harassment itself as well as the lack of response received from the bank in question.

Under the Banking Regulation Act of 1949, the Reserve Bank of India has the ability to impose any penalty it wishes on any institution operating in violation of the guidelines.

If a response to a complaint has not been received after one month, the debtor has the ability to speak to the Banking Ombudsman of his region. A complaint can also be filed with the Ombudsman if the response to the complaint was not enough to satisfy the complainant, or if redressal of the complaint is refused and the debtor feels it was done so inappropriately.

The Banking Ombudsman will not consider any complaint against a financial institution if that institution has not been contacted first in an attempt to resolve the issue or before the bank has been given one month to respond to the last customer communication attempt. The Ombudsman has the right to ignore a complaint if it has been examined already at another appropriate forum (such as a court of law), or if the complaint is considered frivolous or otherwise lacking substance. If the complaint is made inappropriately – that is, the organization being complained against is not the domain of the Ombudsman or the complaint itself should be addressed elsewhere – the complainant will be notified as such. Finally, a complaint will not be considered if it has been over one year since the last response from the financial institution regarding the customer’s issue.

The process of filing a complaint is simple: a letter written on plain paper with no special headings will suffice. An online filing option exists at the Reserve Bank of India website, and the borrower can also send an email to the Banking Ombudsman to file a complaint if he or she prefers. Ensure that the proper Banking Ombudsman for the region is being contacted, as an official whose jurisdiction does include the relevant financial institution will be unable to assist. Note that jurisdiction is considered using the location of the bank branch in question, and not the home of the complainant. The exception is if the complaint is lodged against a banking institution with centralized operations, such as a large credit card company; in this event, the Banking Ombudsman whose district includes the billing address of the customer should be used.

Compensation for a complaint registered against a credit card operation may be issued if the Banking Ombudsman finds in the customer’s favor. The total compensation awarded will not exceed 100,000 rupees, and the Ombudsman will consider not only any financial loss associated with the harassment complaint, but mental anguish caused by the harassment deriving from intimidation, invasions of privacy, or inappropriate contact of friends, relatives, and neighbors.

Indian Banking Ombudsman, their contact information, and areas of operation are below, current as of December 2, 2012:

Shri. Rajesh Kumar
C/o Reserve Bank of India
La Gajjar Chambers,
Ashram Road,
Ahmedabad-380 009
Gujarat, Union Territories of Dadra and Nagar Haveli, Daman and Diu

Shri. M. Palanisamy
C/o Reserve Bank of India
10/3/8, Nrupathunga Road
Bangalore-560 001

Shri A.F. Naqvi
C/o Reserve Bank of India
Hoshangabad Road,
Post Box No.32,
Bhopal-462 011
Madhya Pradesh and Chattisgarh

Shri B K Bhoi
C/o Reserve Bank of India
Pt. Jawaharlal Nehru Marg
Bhubaneswar-751 001


Shri Jaimal Tashi
C/o Reserve Bank of India
4th Floor, Sector 17, Central Vista
Chandigarh – 160 017

Tel.No.0172-272 1109
Himachal Pradesh, Punjab and Union Territory of Chandigarh and Panchkula, Yamuna Nagar and Ambala Districts of Haryana

Shri S. Ganesh
C/o Reserve Bank of India,
Fort Glacis,
Chennai 600 001

Tel No. (044) 2539 9170
Tamil Nadu, Union Territories of Puducherry (except Mahe Region) and Andaman and Nicobar Islands

Shri B.B.Sangma
C/o Reserve Bank of India
Station Road,
Pan Bazar
Guwahati-781 001

Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland and Tripura

Shri M. Sebastian
C/o Reserve Bank of India
6-1-56, Secretariat Road
Hyderabad-500 004

Andhra Pradesh

Shri N.P.Topno
C/o Reserve Bank of India,
4th floor
Rambagh Circle, Tonk Road
Jaipur-302 052

Smt . Madhavi Sharma
C/o Reserve Bank of India
M.G. Road, Post Box No.82
Kanpur-208 001

Tel.No.(0512) 2306278
Uttar Pradesh (excluding Districts of Ghaziabad and Gautam Budh Nagar) and Uttaranchal

Shri M S Soy
C/o Reserve Bank of India
15, Nethaji Subhas Road
Kolkata-700 001

Tel No.(O) : (033)2230-4982
West Bengal and Sikkim

Smt. R Sebastian
C/o Reserve Bank of India
Garment House,
3rd Floor,
Dr. Annie Besant Road,
Worli, Mumbai-400 018

Maharashtra and Goa

New Delhi
Shri M Rajeshwara Rao
C/o Reserve Bank of India,
Sansad marg,
New Delhi – 110001

Tel No. (011) 23730632
Delhi, Jammu & Kashmir, Haryana (except the districts of Ambala , Yamuna Nagar and Panchkula), and the districts of Ghaziabad and Gautam Budh Nagar of Uttar Pradesh

Shri Shrimohan Yadav
C/o Reserve Bank of India,
Patna-800 001

Bihar and Jharkhand

Shri F R Joseph
C/o Reserve Bank of India
Bakery Junction

Kerala and Union Territory of Lakshadweep and Union Territory of Puducherry (only Mahe Region)


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