The Reserve Bank could ban hiring of loan recovery agents by banks, which had been penalised by courts for use of coercive methods.

The ban could be permanent if the banks continue to use 'abusive recovery practices', Minister of State for Finance Pawan Kumar Bansal informed Rajya Sabha through a written reply on Tuesday.

RBI would consider imposing a temporary ban for engaging recovery agents on those banks in case of which strictures have been passed/penalties have been imposed by a High Court/Supreme Court with regard to abusive practices followed by their recovery agents, he said.

The minister further said the RBI has taken up the complaints regarding the use of coercive practices by recovery agents with the concerned banks for appropriate action. "In case of any violation of...guidelines by a bank, appropriate regulatory action is taken by RBI," he said.

RBI, Bansal said, has already issued instructions to commercial banks and non-banking financial companies clearly stipulating that "their agents should not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts".

The guidelines also stipulate that the recovery agents would not humiliate publicly or intrude upon the privacy of the debtors, their family members, referees and friends, make threatening and anonymous calls or make false and misleading representation.

As per the banking code, Bansal said "the collection policy of the bank (should) be built on courtesy, fair treatment and pursuasion...in consonance with the law".