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After RBI missive, FIDC asks NBFCs to revise codes of conduct

Mumbai, October 14, 2022

Has asked them to insert penalty cause for repeated breaches

The Finance Industry Development Council (FIDC) has asked its members to revise their codes of conduct and insert graded penalty clauses for repeated breaches, especially those relating to recoveries, by outsourcing agencies. The move comes after RBI red-flagged increasing complaints about alleged high-handed practices by outsourcing agencies in recovering dues.

The members should introduce exhaustive dos and don’ts for the agencies and the agents (and get them) to adopt principles of fair means of treating customers, FIDC in a statement.

Industry lobby group FIDC suggested the code of conduct and “dos and don’ts” be made part of the standard agency agreement. Wherever necessary, a pact may be executed with the existing outsourced agencies.

FIDC said RBI has been making focused inspection of outsourcing activities and customer service at the NBFCs also, apart from banks. RBI has observed that agents were found to be contacting customers on social media. They were found using unfair means to find contact details of customer's family/friends and calling them at other than the prescribed hours, it said.

RBI observation pointed out that the companies were paying stepped-up incentives and offered higher commissions (up to 35 per cent) for every successful collection from delinquent borrowers.

The complaints were misclassified as requests/enquiry on successive interactions with the customer and hence remained unresolved. RBI observed there was no process for root cause analysis (RCA) of complaints and escalations to top management for underlying issue, FIDC statement said.

NBFC should identify the particular errant agent or agency in default of the code of conduct and take corrective/penal measures. They should seek reports on adherence to code of conduct by each of the agents and corrective action taken in case of deficiency.

On customer complaints redress, the industry lobby group said they should redesign the complaint response codes for correct classification. The finance companies should update training materials and arrange retraining of staff on topics like Fair Practice Code, fees and charges.

They should set up a complaints management committee involving relevant stakeholders. The committee should meet at least once a month to review RCA of complaints and any other issues relating to customer complaints.

[The Business Standard]

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