Supreme Court Guidelines on Loan Recovery
The Supreme Court upheld the validity of the country`s law that allowed lenders to sue them in bankruptcy court. The two-judge panel, headed by Judge L. Nageswara Rao, said motions challenging the law would be dismissed. The ruling is a boost for lenders as it allows them to request fees from loan guarantors, even if insolvency proceedings are ongoing against the companies. This could potentially accelerate the efforts of lenders trying to clean up one of the world`s worst piles of bad debt. They had read or heard about the incident in Jharkhand`s Hazaribag district, in which a 27-year-old pregnant woman, the daughter of a farmer, was crushed to death under a tractor by a rescue worker. This occurred when the officer attempted to forcibly seize the vehicle for non-payment of fees. With an estimated 1.5 million debt collectors among approximately 75,000 agencies tracking borrowers across the country, incidents of harassment and bullying are commonplace. “After Covid, when the moratorium was lifted, banks and non-bank financial corporations (NBFCs) were under pressure, and they in turn passed on stress to collection agencies and agents. The use of unqualified agents is another reason for such incidents,” says Nitin Purswani, CEO and co-founder of Medius, an AI-powered debt collection solution for lenders. In this age where people borrow to meet a variety of needs, it is important to know how to respond to rescue officers` intimidation tactics.
Typical grievances Credit collectors use a variety of tactics that have been declared illegal. First, they often call parents, relatives, colleagues, neighbors, and sometimes even the borrower`s employer to embarrass them. “They use social stigma as a means of coercion,” says Madan Srinivasan, co-founder of Creditas Solutions, a digital debt collection agency. Second, they flood the borrower with calls and messages. You may use offensive language. Credit collection officers also make surprise visits to borrowers at unusual times, such as early morning or late evening. Sometimes they even resort to physical violence. Third, recovery agents sometimes pretend to be others. If the borrower does not meet them, he pretends to go to court. You say that your case is ongoing and that if you do not show up, you could go to jail. “The goal is to harass customers. It is believed that such harassment and pressure tactics will lead to prioritization.
The borrower will find one or the other way to repay the loan,” says Arun Ramamurthy, Andromeda`s Director of Sales and Distribution and an expert in digital loans. Agents must stick to the code Just because a borrower has defaulted, a debt collector has no right to behave badly towards him. “Borrowers need to know their rights. Unfortunately, most borrowers don`t,” says Purswani. The federal government introduced the law in 2019 that allowed lenders to file parallel bankruptcy filings against defaulting companies and the people who guaranteed those loans. Lenders filed bankruptcy lawsuits against businessmen last year, including Anil Ambani of Reliance Group, Kapil Wadhawan of Dewan Housing Finance Corp Ltd. and Sanjay Singal of Bhushan Power & Steel Ltd. The proceedings were dismissed due to appeals to higher courts. India`s Supreme Court has allowed personal bankruptcy proceedings against individuals, including tycoons who were once among the country`s wealthiest, to be reopened. Insightful news, sharp views, newsletters, e-newspapers and more! Unlock concise comments only on Business Standard.
Please wait while you are redirected to the next page. TO READ THE FULL STORY, SUBSCRIBE NOW FOR ONLY RS 249 PER MONTH. Also Read: Actively Consider Live Streaming of Supreme Court Proceedings, Says CJI Ramana Vivo S16, Vivo S16 Pro to Start by Late December The Supreme Court has ruled that debt resolution for companies does not erase the responsibility of the personal guarantor, said Misha, a partner at Shardul Amarchand Mangaldas & Co. known by a name. “This will help finally settle jurisdiction over the simultaneous commencement and continuation of insolvency proceedings against major borrowers and guarantors,” she said. –Bloomberg Bank shares contributed to their gains. Seven of the top 10 performers in the S&P BSE Sensex benchmark index were lenders, led by IndusInd Bank Ltd., which jumped 3.4% to its highest level in two months. One measure of banks, S&P BSE Bankex, was the best performer among the 19 sector indicators compiled by BSE Ltd, up 2%, compared with a gain of 1.4% for benchmark Sensex. Exclusive stories, curated newsletters, 26 years of archives, e-papers and more!.