India is a land of vibrant colors, where dreams are as big as the hearts that carry them. However, a growing menace is spreading across the country like a plague. It’s an old story with a new technological twist. The cost of debt, dreams, and desperation is sometimes paid with people’s lives. Delving into the recovery sector in India is like navigating rough waters, but I invite you to take a plunge to truly understand the agony of borrowers and the people affected by this crisis.
Introduction
Take a moment to consider why there is a surge in suicide attempts among debtors in our country. Have we become deaf to their cries in this fast-paced and self-centered world? Today it’s them; tomorrow, it could be you or your family. While India aggressively marches toward becoming a developed nation, its people remain deeply unhappy. The country was ranked 61st in the Mental State of the World report, reflecting the miserable condition of its population.
Imagine a parent working tirelessly to make ends meet, taking loans to fund their children’s basic education, only to be pushed into a debt trap by cruel twists of fate. They find themselves facing horrendous recovery tactics from lenders and agents. You may not realize it, but such tragedies may be unfolding around you, in nearby poor localities, small areas, and villages, where silence is enforced by fear and humiliation.
The Reserve Bank of India (RBI), in its foresight, identified this looming crisis and issued warnings long ago. In 2008, the RBI introduced guidelines for banks and NBFCs, stressing the need for fair and just recovery practices that operate within legal bounds. Let’s examine a few judgments, case studies, and reports to further understand this issue.
Case Studies: The Tragic Impact of Unfair Practices
Consider the case of Kiranjit Kaur, a woman from Punjab who attempted suicide due to increasing debt and the unscrupulous recovery tactics of agents. Her tragic story gained attention in 2022 but was soon forgotten, despite being just one drop in the ocean of similar cases reported across the country.
An investigative series by the Free Press Journal found a recurring pattern of unjust and abusive recovery practices by major financial institutions in India. These practices included calling borrowers at odd hours, persistent calls and texts, and threats against them and their loved ones. The National Crime Records Bureau’s report on ‘Accidental Deaths & Suicides in India’ presents a bleak image: in 2021, over 20,000 individuals took their own lives due to bankruptcy or indebtedness.
In K.K. Kochunni v. State of Madras, the Supreme Court of India reiterated the fundamental right to life and personal liberty. Yet, this right is under threat due to the predatory recovery practices of some lenders and agents.
Not all financial institutions engage in such unethical behavior, but how do we separate the good from the bad? The advent of technology has been a double-edged sword in revolutionizing the financial sector. While loans are now more easily accessible, this convenience has also exposed borrowers to dubious scams. A study by the Digital Lenders Association of India revealed that over 60% of digital lending apps operate in a regulatory grey area.
Another tragic incident involved Sai Aravind from Telangana, whose suicide note went viral on social media. He blamed harassment by loan apps for his decision. The COVID-19 pandemic further exacerbated the issue, disrupting livelihoods and draining savings, trapping many individuals in debt. The moratorium plan provided temporary relief to some, but for others, it only postponed their problems, adding further interest. A report by the Indian Institute of Management, Bangalore highlighted the disproportionate impact of debt stress on marginalized communities. This raises an important question: what is the way forward?
Addressing Financial Stress: A Mental Health Perspective
Financial stress is a silent but persistent threat, slowly eroding mental well-being. The critical role that mental health plays in this crisis cannot be overlooked. A study by the National Institute of Mental Health and Neurosciences (NIMHANS) found a strong correlation between financial distress and mental health issues. Education and financial literacy are powerful tools that can help break free from this vicious cycle. At its core, this is not just a borrower or lender issue—it is a human rights issue.
Conclusion
Reflect on this: Do we want our financial institutions to thrive at the cost of human rights, or should we strive for an equilibrium that balances borrowers’ rights with the interests of banks? The choice is ours.
References
- Times of India. Global Mental Health Report, Sapien Labs, 4th Annual Report.
- Reserve Bank of India. (2008). Guidelines on Fair Practices Code for Lenders, RBI/2006-2007/138 DBOD.Leg.No.BC.28/09.07.005/2006-07.
- The Tribune. (2022). “Woman attempts suicide over harassment by recovery agents in Ludhiana.” The Tribune India.
- Free Press Journal. (2021). “Debt trap: The dark side of recovery practices.” Free Press Journal Investigative Series.
- National Crime Records Bureau. (2021). Accidental Deaths & Suicides in India. Ministry of Home Affairs, Government of India.
- K.K. Kochunni v. State of Madras, AIR 1959 SC 725.
- Digital Lenders Association of India. (2021). “Study on Digital Lending Landscape in India.” DLAI Report.
- The News Minute. (2020). “Telangana techie dies by suicide, blames harassment by online loan app in note.” The News Minute.
- Indian Institute of Management, Bangalore. (2022). “Impact of Debt Stress on Marginalized Communities in India.” IIM-B Research Report.
- National Institute of Mental Health and Neurosciences. (2021). “Financial Distress and Mental Health: A Cross-Sectional Study.” NIMHANS Research Publication.
