Governor Shri Y.V. Reddy’s mid-term policy review statement of 2007-2008 with specific observation on recovery methods adopted by banks

1st November 2007.

PRESS RELEASE

For Immediate Release

Sub: Governor Shri Y.V. Reddy’s mid-term policy review statement of 2007-2008 with specific observation on recovery methods adopted by banks.

First, we wish to place on record our sincerest of thanks to Mr. Y.V. Reddy, Governor, Reserve Bank of India for taking notice of the growing menace of recovery agents in his mid-term review of 2007-2008 and issuing a stern warning to the banks advising them to follow laid down procedures for recovery or face serious action from RBI.

We wish to condemn statements emanating from foreign banks saying that it will become difficult to issue loans to marginal borrowers. We wish to point out that these statements confirm what we have been saying all along that these foreign banks are using the small and marginal borrowers to charge indiscriminate rates of interest ranging between 30% to 75% per annum. Such interest rates are usurious and not tenable under relevant money lenders acts promulgated by various states of the union. We would also like to bring to the attention of the borrowing public at large some of the sharp practices followed by these banks under the Open Market Loan schemes which are not regulated by RBI.

• It is a common practice to quote interest rates at monthly reducing method but charge on flat rate basis, thus making these loans twice as expensive.
• It is a common and deceptive practice to lure customers with advertisements saying the loans being offered are without any collateral security and then take blank post dated cheques from the borrower as security for the loan.
• It is a common and deceptive practice to deposit all the cheques thus taken in one go and /or threaten to do so and force the borrower into lengthy litigation under section 108 of Negotiable Instruments Act for bouncing of cheques. ( A non-bailable offence )
• It is a common and deceptive practice to lodge such cases at a remote location with an intent to harass the borrower and force him to pay.
• It is a common and deceptive practice to charge usurious rates of interest to borrowers by not giving loan documents including loan agreement, schedule of payment, etc at the time of soliciting the business of the borrower.

Given the above facts, we wish to reiterate that it is only the small and marginal borrower who will fall into such traps laid down by these foreign banks. Those already having money at their disposal will not borrow under such high rates and deceptive practices followed by banks such as Standard Chartered, American Express, ICICI Bank, Citibank, Citi Financial, GE Countrywide, etc.

For Credit Consumers Association of India



Vijay Kamble
(President)