The Indian Banks' Association (IBA) has warned banks not to go overboard in their drive to recover bad loans. The caution from the lobby of banks' management comes after some state-run lenders such as Corporation Bank and the State Bank of India, in their zest to recover bad debts, put up photographs of defaulting borrowers at their branches.
At a meeting of the chiefs of large commercial banks, IBA said such a method could create stress on borrowers which could backfire. There are past instances when borrowers committed suicide due to aggressive recovery procedure adopted by banks, which led to the lender being dragged to court. Banks have now decided to display photos of only willful defaulters, sources said.
Earlier, industry bodies protested saying banks were being unfair to their clients. However, defending its loan recovery method, Corporation Bank chairman and managing director Ramnath N Pradeep said: "If borrowers can adopt different means to avoid payment of loans, bankers too can adopt ways to recover loans." "So far, the response in recovery of money has been good. We have recovered over Rs 200 crore from written-off accounts," he said, adding, "We are not targeting farmers and poor borrowers in the recovery drive."
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