The Chairman of ICICI Bank has been summoned by the Allahabad High Court to address concerns regarding the bank's utilisation of recovery agents in a loan case, despite a Supreme Court prohibition, as reported by Bar and Bench. This directive follows a legal battle involving a defamation case against bank officials.
Justice Prashant Kumar of the Allahabad High Court issued the order on 15 June, directing the ICICI Bank Chairman to submit a personal affidavit detailing the bank's actions. The chairman is required to explain how the bank engaged recovery agents and pursued a civil suit against borrower Rahul Singh, despite him fully repaying his loan with interest, the court stated.
"He may also state as to how his Bank was still taking the services of the recovery agents when the same was clearly barred by the Supreme Court," Justice Kumar noted.
Background of the case
The case revolves around Rahul Singh, an American citizen and Overseas Citizenship of India (OCI) cardholder, who obtained a home loan of Rs 7,80,000 from ICICI Bank’s Noida branch in 2002. Despite settling the loan amount with interest and foreclosure charges in 2007, Singh was mistakenly labeled as a defaulter in the Credit Information Bureau (India) (CIBIL) rating, a crucial credit score in India. Additionally, the bank filed a civil suit against him in 2014, aggravating the issue.
In his petition to dismiss the defamation case, Singh disclosed that recovery agents hired by the bank in 2013 harassed him at his residence, making derogatory remarks and causing significant distress. This prompted Singh to initiate defamation proceedings against the bank officials.
In a separate case in 2007, the Supreme Court had directed the bank to refrain from using recovery agents to recover bank loans. Furthermore, the Reserve Bank of India (RBI) had established comprehensive rules for the engagement of recovery agents by banks.
RBI guidelines on debt recovery agents
In response to concerns raised in the early 2000s regarding harassment and physical assault by recovery agents, the RBI introduced guidelines in 2007 to regulate the conduct of debt recovery agencies. These guidelines mandated 100 hours of training and passing a written examination on debt recovery before recovery agents could be employed.
The RBI emphasised that outsourcing any activity, including debt recovery, did not absolve banks of their responsibilities. The guidelines explicitly prohibited any form of intimidation or harassment, whether verbal or physical, during the debt collection process.
Violation of Supreme Court judgment
The Court highlighted that the Supreme Court had explicitly prohibited the use of recovery agents by banks in a ruling six years prior to the incident. The High Court demanded an explanation from the ICICI Bank Chairman on how the bank continued to contravene this judgment in 2013.
The High Court has scheduled the next hearing for 10 July, during which the ICICI Bank chairman is expected to provide an explanation and the necessary affidavit.
