RBI Governor Shaktikanta Das said that harsh recovery methods used by a few lenders is a serious area of concern for the central bank. He mentioned how certain regulated, as well as unregulated entities use unacceptable recovery methods without having adequate checks and controls over their recovery agents. “We have received complaints of customers being contacted by recovery agents at odd hours, even past midnight. There are also complaints of recovery agents using foul language,” Das said in his inaugural address at the FE Modern BFSI Summit today. He stressed that such kind of actions by recovery agents are “unacceptable” and pose reputational risk for financial entities themselves. The RBI governor said, “We have taken serious note of such instances and will not hesitate to action against such errant regulated entities.”
Das asked all lenders, banks to pay special attention to this problem. He emphasised that customer interface should be within certain broad parameters and framework. The RBI has also set up a committee to review customer services standards in RBI-regulated entities. The committee will also review emerging and evolving needs of the customer service landscape, especially in the context of evolving digital financial services products and their distribution. The committee will then suggest measures which the RBI can consider and adopt.
“I have often spoken about the importance of good corporate governance in banks and financial institutions. A good governance structure will have to be supported by effective risk management and compliance functions. The cost of compliance to rules and regulations should be perceived as an investment, as inadequacy in this regard can prove to be highly costly. Compliance culture should ensure adherence to not only laws, rules and regulations, but also integrity, ethics and codes of conduct,” Das added.
He went on to say that the Global Financial Crisis was preceded by a wave of financial innovations related to securitisation and other innovative financial instruments. These allowed the financial system to grow at a pace that was beyond its capacity to manage, especially from the point of view of the connected risks. Given such past experience, prudence demands that introduction of innovations in the financial system should be done responsibly and in a calibrated manner, taking into account the capacity of financial entities to manage potential risks.
“It goes without saying that innovations which provide opportunities through high risk taking need to be managed by sound corporate governance and risk management practices within the financial institutions. The senior management and internal control mechanisms in financial institutions should also ensure that their IT systems are robust and transparent, and not open to manipulation that may camouflage the true state of affairs in the organisation,” Das said.