 bill no 16 of  2012 the prohibition on use of coercive methods for recovery of bank loans bill, 2012 bydr kirit premjibhai solanki, mp a billto prohibit the use of coercive methods such as intimidation and harassment either verbal or physical against any person or his family members for recovery of loans by banks, or their agents, whether authorized or not, and for matters connected therewith or incidental theretobe it enacted by parliament in the sixty-third year of the republic of india as follows:— 1 (1) this act may be called the prohibition on use of coercive methods for recovery of bank loans bill, 2012short title, extent and commencement(2) it extends to the whole of indiadefinitions2 in this act, unless the context otherwise requires,—(a) "bank" means any scheduled bank included in the reserve bank of india act, 1934 or any private or foreign bank or any financial institution authorized by the2 of 1934government to accept deposits, channel deposits into lending activities and includes their agents;(b) "family" includes mother, father, spouse, son, daughter, sister and brother and their families; and(c) "prescribed" means prescribed by rules made under this act53 no bank or its agent, whether authorized or not, shall, for the purpose of recovery of a loan,—banks not to resort to use of illegal means for recovery of loan(i) resort to use of intimidation or harassment, either verbal or physical, againstany person or his family;10(ii) make any threatening call or make false and misleading representation to thatperson or his family;(iii) insult that person or his family in public; (iv) cause damage or take away any movable property of that person; (v) cause damage or forcefully acquire the immovable property of that person; or15(vi) visit residence of that person during odd hours4 no bank shall outsource its process of recovery of loan to any outside agency without the approval of the reserve bank of indiabank not to outsource loan recovery without approval of reserve bank of india5 the reserve bank of india shall, from time to time, issue necessary guidelines to banks for proper scrutiny of papers relating to disbursement of loansreserve bank of india to issue guidelines for scrutiny of papers relating to disbursement of loanspenalty206 whoever contravenes the provisions of this act shall be punished with imprisonment,which may extend to five years and also with fine, which may extend to rupees five lakhoffences by a company257 (1) where a contravention of any of the provisions of this act is committed by a company, every person who, at the time the contravention was committed, was in charge of, and was responsible to, the company for the conduct of business of the company as well as the company, shall be guilty of the contravention and shall be liable to be proceeded against and punished accordingly:provided that nothing contained in this sub-section shall render any such person liable to any punishment, if he proves that the contravention was committed without his knowledge or that he had exercised all due diligence to prevent such contravention30(2) notwithstanding anything contained in sub-section (1), where a contravention of any of the provisions of this act is committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary, or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly35explanation—for the purpose of this section:—(i) "company" means any body corporate and includes a firm or other association of individuals; and(ii) "director", in relation to a firm, means a partner in the firmpower to remove difficulties8 if any difficulty arises in giving effect to the provisions of this act, the central government may, by order, published in the official gazette, make such provisions, not inconsistent with the provisions of this act, as may appear to be necessary or expedient for removing the difficulty:5provided that no such orders shall be made after the expiry of a period of three years from the date of commencement of this actoverriding effect of the act109 the provisions of this act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force but save as aforesaid, the provisions of this act shall be in addition to and not derogation of any other law for the time being in forcepower to make rules10 (1) the central government may, by notification in the official gazette, make rules for carrying out the purposes of this act15(2) every rule made under this act shall be laid, as soon as may be after it is made, before each house of parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both houses agree in making any modification in the rule or both the houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything  previously done under that rule20 statement of objects and reasonstoday, there is a cut throat competition among the banks and financial institutions to increase their customer base, particularly, by giving loans on attractive terms day in and day out, numerous calls are made by the representatives of banks or their agents to lakhs of persons offering loans for all kinds of their requirements once a person accepts the offer and completes the formalities, his ordeal begins a number of hidden conditions and charges about which the customers are not informed at the time of offering loans comes to light if due to some genuine reasons, a customer fails to repay one or two instalments of loan, the bank or its agent which were so soft while providing loan, change their colors and adopt all kind of illegal and harsh methods to recover the loan though many of the banks are doing a fair business and following the procedure established by law in case of default, yet there are banks which resort to intimidation and harassment in normal course, if a customer is not paying his debt, proceeding against him may be initiated in debt recovery tribunal or courts instead of harassing him in fact, in the era of outsourcing, banks have also given the responsibility of recovering bad debt to some private companies, which for each recovery, get commission more often than not the recovery agents and banks are not at the same wavelength these private companies often employ musclemen who threaten the customers and their families these musclemen insult the customers in public and forcibly take away the properties for which the loan has been secured and also make anonymous calls various courts and the reserve bank of india have, on several occasions, cautioned the banks and their agents not to resort to such means to recover loan the reserve bank of india has even issued a set of guidelines asking banks and their agents, not to intimidate or harass people in their efforts to recover bad debt but all these measures have not been able to curb the coercive methods by banks or their agents simply because these guidelines are ineffective in the absence of any punishment for their violation therefore, it is high time that a law on the subject may be framed to save the innocent customers taking loans from banks and financial institutions from the harassment and insulthence this billnew delhi;kirit  premjibhai  solankinovember 22, 2011 memorandum  regarding  delegated  legislationclause  10 of the bill empowers the central government to make rules for carrying out the purposes of the bill the rules will relate to matters of detail only the delegation of legislative power is, therefore, of a normal character———— a billto prohibit the use of coercive methods such as intimidation and harassment either verbalor physical against any person or his family members for recovery of loans by banks,or their agents, whether authorized or not, and for matters connectedtherewith or incidental thereto————(dr kirit premjibhai solanki, mp)gmgipmrnd—4169ls(s3)—14032012