The Reserve Bank of India has asked banks to review their loan recovery practices following recent instances of deaths, allegedly due to excesses by recovery agents.

The governor, Y V Reddy, was in consultations with the chiefs of major banks today as a part of the pre-monetary policy review process. The RBI will conduct second quarterly review of the monetary policy on October 30.

"RBI has asked bankers and Indian Banks Association to study the working of recovery agents and come up with suggestions to improve the recovery processes and ensure monitoring of the practices,'' said a banker present at the meeting.

O P Bhatt, chairman and managing director of State Bank of India [Get Quote], K V Kamath, managing director and CEO of ICICI Bank [Get Quote], A K Khandelwal, CMD, Bank of Baroda [Get Quote], T Narayanasamy, CMD, Bank of India and Sanjay Nayar, CEO, Citibank India met the governor.

"Normally, the governor and his team are patient listeners. This is the first time that he raised an issue in a pre-monetary policy review meeting. The recent media reports on banks recovery agents' harsh methods leading to social distress may have forced the governor to raise the issue at the meeting,'' said a banker.

Banks' recovery practices have come under the scanner of state governments and local police. The instances of suicides by the customers and the compensation provided by banks, have raised the central bank's eyebrows.

It is learnt that the RBI is working on a comprehensive set of guidelines to hold banks responsible for ensuring that their recovery agencies do not recruit individuals with criminal backgrounds. The proposed guidelines will also require each bank to publish the names of its recovery agencies.

"These agents will be required to call from registered telephone numbers, which will have to be listed on the bank's website. Collection agents would be barred from making calls from any other number,'' said a banking source.