To counter mounting customer complaints against banks resorting to strong arm tactics to recover loans, bankers have now decided to first send a letter to defaulters, informing them that they have a month's time to clear dues, before the case is handed over to a recovery agent.

"We have, in consultation with the Banking Codes and Standards Board of India, decided to send a letter to a defaulter giving him/her enough time to clear the dues. If the customer reverts to us we would give the individual necessary credit counselling. However, if the customer does not show up within the specified time frame we would hand over the case to the recovery agent as informed to the customer,'' said, Aditya Puri, managing director and chief executive officer, HDFC Bank [Get Quote].

Banks have been facing wrath from the Reserve Bank of India [Get Quote], judiciary, governments and public on their debt recovery practises. So much so that banks and non banking finance companies decided to either scale down or exit the small ticket size personal loans business where the default rates were increasing.

Leading private sector banks like ICICI Bank [Get Quote] and HDFC Bank have exited the small ticket size personal loans. Citigroup tightened its lending procedures.

"Recovering loan from the defaulters is become very difficult. The activism against collection is very unfortunate. the regulator and the Indian Banks Association is quiet on the issue,'' said a foreign banker.