Module: General Practice
Q4: Consider the following statements regarding the engagement of recovery agents by banks:
Statement 1: The draft norms require banks to establish a dedicated grievance redressal mechanism exclusively for handling complaints related to loan recovery practices.
Statement 2: If a borrower lodges a formal grievance against an agent, the bank is permitted to continue forwarding the case to recovery agents while the complaint is being resolved.
Statement 3: Banks must ensure that their engaged recovery agents obtain a mandatory certification from the Indian Institute of Banking and Finance (IIBF).
Statement 4: The ultimate responsibility for compliance with regulatory requirements regarding outsourced recovery agents rests entirely with the engaging bank.
Which of the above statements is/are correct?
Statement 2: If a borrower lodges a formal grievance against an agent, the bank is permitted to continue forwarding the case to recovery agents while the complaint is being resolved.
Statement 3: Banks must ensure that their engaged recovery agents obtain a mandatory certification from the Indian Institute of Banking and Finance (IIBF).
Statement 4: The ultimate responsibility for compliance with regulatory requirements regarding outsourced recovery agents rests entirely with the engaging bank.
Which of the above statements is/are correct?
✅ Correct Answer: A
🎯 Quick Answer:
Statements 1, 3, and 4 are correct. Statement 2 is incorrect. (Option A)When a bank hires a debt recovery agency, the agency acts as an extension of the bank itself.
Structural Breakdown: To professionalize the sector, the RBI demands that agents undergo structured training to understand legal boundaries, data privacy, and ethical communication before interacting with defaulters.
Historical / Static Context: Under the RBI’s Fair Practices Code (FPC), lenders have always been prohibited from undue harassment.
However, enforcement was challenging due to the informal nature of many recovery agencies.
The Dynamic Update (NEW) & Data: The new draft enforces strict operational boundaries.
Qualitatively, it mandates that if a borrower files a grievance, the bank must not forward the case to an agent until the grievance is definitively resolved (making Statement 2 incorrect, unless the bank can legally prove the complaint is entirely frivolous). The hard facts tested require all recovery agents to pass a specialized Debt Recovery Agent training program and obtain a certificate strictly from the Indian Institute of Banking and Finance (IIBF), cementing the bank's absolute liability for their agents' actions.