The decision by the State Consumer Commission in New Delhi to fine ICICI Bank Rs 55 lakh as damages in a loan recovery case should act as a major wake-up call to banks and other financial institutions in India, if earlier strictures and the ensuing bad publicity have not.
This particular case has another twist — not only did goons employed by the bank’s collection agency use violence, they ended up badly injuring an innocent man.
The man had to hospitalised and the court has awarded him Rs5 lakh as compensation “for the brutal and boorish” behaviour of the bank; the rest of the money is to be
deposited with the State Consumer Welfare Fund for legal aid.
The loan was taken for a medium range car, worth tenth of the total fine amount. That is, by outsourcing its loan recovery wing to such agents as it did, ICICI has ended up paying a much higher price than it would have for a defaulting loan.
The question is not just of money: it is of credibility, surely the cornerstone of a business establishment.
The other problem is that of spinning off sections of business to outside agencies without checking their credentials or business practices.
The responsibility of a bank or any other organisation does not end by outsourcing jobs; when a contractor — in this case a collection agency — mishandles the case, it is the bank’s reputation that suffers, as has happened in this case.
Outsourcing is a good idea; it saves large organisations time, money and effort — smaller outfits can be employed to handle many service duties.
But it also creates barriers between an organisation and a customer; the latter feels that he is the most insignificant link in the chain.
Banks, credit card companies and telephone companies — all integral parts of the service industry — are unable to combine customer service with their fast-growing businesses.
The result is customer alienation.
Banks have every right to deal with those who are laggards in repayment of loan instalments; indeed, there are customers who may even be wilful defaulters.
But there has to be a system, one that achieves the desired results while being sensitive to the customer. In any case, using violence is unacceptable.
The domain of commercial enterprise - no matter how powerful — cannot extend into the authority of the government, which includes law and order.
The courts and consumer organisations can act as guardians, but it is imperative that private banks get their houses in order.
Apart from the ugliness of it all, it is also bad for business, something that should be avoided in a competitive economy.
The Consumer Commissioner’s order should send that message out loud and clear.
This particular case has another twist — not only did goons employed by the bank’s collection agency use violence, they ended up badly injuring an innocent man.
The man had to hospitalised and the court has awarded him Rs5 lakh as compensation “for the brutal and boorish” behaviour of the bank; the rest of the money is to be
deposited with the State Consumer Welfare Fund for legal aid.
The loan was taken for a medium range car, worth tenth of the total fine amount. That is, by outsourcing its loan recovery wing to such agents as it did, ICICI has ended up paying a much higher price than it would have for a defaulting loan.
The question is not just of money: it is of credibility, surely the cornerstone of a business establishment.
The other problem is that of spinning off sections of business to outside agencies without checking their credentials or business practices.
The responsibility of a bank or any other organisation does not end by outsourcing jobs; when a contractor — in this case a collection agency — mishandles the case, it is the bank’s reputation that suffers, as has happened in this case.
Outsourcing is a good idea; it saves large organisations time, money and effort — smaller outfits can be employed to handle many service duties.
But it also creates barriers between an organisation and a customer; the latter feels that he is the most insignificant link in the chain.
Banks, credit card companies and telephone companies — all integral parts of the service industry — are unable to combine customer service with their fast-growing businesses.
The result is customer alienation.
Banks have every right to deal with those who are laggards in repayment of loan instalments; indeed, there are customers who may even be wilful defaulters.
But there has to be a system, one that achieves the desired results while being sensitive to the customer. In any case, using violence is unacceptable.
The domain of commercial enterprise - no matter how powerful — cannot extend into the authority of the government, which includes law and order.
The courts and consumer organisations can act as guardians, but it is imperative that private banks get their houses in order.
Apart from the ugliness of it all, it is also bad for business, something that should be avoided in a competitive economy.
The Consumer Commissioner’s order should send that message out loud and clear.