Banks may have to spend up to Rs 800 crore (Rs 8 billion) in training close to one million employees to comply with the Reserve Bank of India's [Get Quote] proposed loan recovery norms.

In its second draft guidelines for recovery agents released recently the regulator has proposed that banks should tie up with the Indian Institute of Banking and Finance (IIBF) or organise programmes in their own training colleges to ensure that every agent passes the exam conducted by IIBF during a one-year period.

The norms have also defined 'agents' to include not just agencies engaged by banks and their agents or employees but also bank employees.

The biggest grouse for the bankers is the additional cost that they would have to incur on 100 hours of training, which could be anything between Rs 600 crore and Rs 800 crore (Rs 6-8 billion).

NIS Sparta, which operates training facilities for financial sector, charges around Rs 6,000 per employee. An institute run by a public sector bank said the 100-hour training costs Rs 6,500 per employee, which does not include the cost of study material and meals.

Study material, including brochures and CDs will cost around Rs 500, while meals for 14 days and other costs add up to around Rs 1,000, taking the package to nearly Rs 8,000 per employee.

With recovery being one of the high-pressure jobs, most employees are unwilling to put in long stints in the collection department of private banks, resulting in high churn and, therefore, more training needs, said a banker.

In the case of public sector banks, employees are shifted from one department to another, which will result in training almost the entire workforce over a period of time.

Meanwhile, the Indian Banks' Association (IBA), which represents the interests of both state-owned and private banks, has written to the RBI seeking clarity on the term 'recovery'.

In a large number of banks there are customer services departments that follow-up with customers who fail to pay their credit card or personal or car loan dues on the due date.

"Before the matter is referred to the collection department, which usually takes a month, it is this department which follows-up. We do not know if even this will constitute recovery activity and if we need to train our customer service executives too," said a senior banker.

The IBA has submitted its feedback to RBI, which is expected to release the final guidelines shortly.

Banks have also expressed their concerns over including the telephone numbers of recovery agents in the notice and authorisation letter sent to defaulting borrowers.

"These recommendations were listed in the first draft as well. We send our feedback but it seems to be falling on deaf ears. In this day and age how can you expect a bank to make public the number of its recovery agents," said the collection head of a private bank.

"Today, customers can opt for call-barring facilities. What can a bank do if the customer refuses to receive calls? Unless RBI wants us to not pursue defaulters there is no reason why it should include such a suggestion," said the banker.

Banks have also said the recommendation to enforce Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Sarfaesi Act) to repossess assets will delay the recovery process.

"Under Sarfaesi the bank will have to wait for 90 days, which means three installments before it can pursue the defaulter. The bank will also have to send the borrower an official letter before taking any action. This causes delay in recovery and the value of the asset also depreciates," said a banker.