RBI guidelines make training mandatory for recovery agents

MUMBAI: It's back to school for loan recovery agents, who now need to complete a certificate course to comply with new guidelines introduced by the regulator. Banks have been given a year to ensure that all recovery agents appointed by them complete 100 hours of training and obtain a certificate from the Indian Institute of Banking and Finance (IIBF). Worried over the huge reputational risk that the banking industry faces over adverse publicity, RBI has decided to review the policy, practice and procedure involved in the engagement of recovery agents in India. Until recently, banks employed recovery agents, but never spoke about them and practices followed by them were never codified for the industry. Recovery agents were hired on performance-linked compensation, and their tactics were seldom questioned by banks. But last year, the regulators and banks were forced to take a relook after a borrower was driven to suicide, following harassment by the recovery agent appointed by a large private bank. At present, there is no educational course for recovery agents. RBI has asked Indian Banks’ Association (IBA) to formulate a certificate course in consultation with IIBF for direct recovery agents, with a minimum training of 100 hours. In doing so, the central bank appears to have taken a leaf from the books of the insurance regulator who has made it compulsory for all insurance agents to undergo minimum training and obtain a certificate from the Insurance Institute of India. But a key difference will be that unlike insurance agents, recovery agents may end up paying for the training and the examination. This is because, in the case of insurance agents, they are ‘tied’ to an insurance company and cannot sell for others. Insurance companies, therefore, have an interest in educating prospective agents. Recovery agents obtain work from across lenders. While IRDA’s objective in training insurance agents is to prevent mis-selling, RBI’s objective is to sensitise recovery agents to borrowers’ rights and about the law of the land. “Keeping in view that a large number of agents, throughout the country, may have to be trained, other institutes or a bank’s own training college may provide the training to recovery agents by having a tie-up with the Indian Institute of Banking and Finance so that there is uniformity in training standards. However, every agent will have to pass the examination conducted by IIBF all over India,” RBI said in its circular.

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