Debt recovery
Manu's mandate for debt recoveryIf only the bankers had strictly adhered to the manual of instructions on debt recovery prescribed by Manu, the Vedic lawgiver, they could have avoided the vexatious problem of mounting overdues and growing NPAs.

Manu, who recognised money-lending as a lawful occupation, has stipulated not only the rates of interest to be charged but also very categorically outlined the means to be adopted for recove-ring the dues. Nothing escapes the attention of the stern lawgiver while elaborating the civil and ceremonial laws in his time-tested treatise Manusmrithi. In his scheme of lending and borrowing, there is no scope for NPAs to stare at the lender's face, unlike the present day burden of overdue advances. Of the 18 titles of civil and ceremonial laws, the first one is the non-payment of debts runadana which stipulates the responsibilities of the borrower, lender and also of the king in ensuring adherence to prescribed rules.

Manu has ordained that debt has to be repaid by the borrower unfailingly and in recovering the dues, the lender may adopt any means he deems fit to get back his money. He has laid down a five-fold procedure, any of which to adopt.India got pushed into a corner, by its own follies and was forced to look around the world for a way out of the payment crisis. In 1991, the International Monetary Fund (IMF) was approached once again for a stand-by assistance. It laid down its rigorous conditionalities and the government of India agreed to free the country from a controlled regime

The five methods

Dharmena - through moral pursuance,

Vyavaharena - through legal process,

Balena - through the use of force,

Chhalena - through deceit

and Acharithena - through torture.

The first step in the recovery process is to remind the borrower of his moral obligation to repay the debt, counsel him to discharge his moral responsibility and impressing on the dharma of being debt-free, runa mukta. A debtor cannot absolve himself of his debts even after death, according to Manu.

The debtor's successors have the irrevocable responsibility of repaying the debt.

The second step, if the first one did not yield the desired result, is to take legal action, dragging the borrower to the king's court. The king is vested with all powers - which the present day Debt Recovery Tribunals would certainly envy - to compel him to repay. The penalty for non-repayment acts as a deterrent against delaying the closure of the account.

The adage that "justice delayed is justice denied" was perhaps literally followed then, may be due to very few cases compared to the large number of suits presently pending in different courts all over the country.Lender can use force, bala, if he thinks fit, to confiscate the assets. The indigenous moneylender in India has been invariably taking recourse to this method, diabolically and mercilessly as retold in folklores and classical literature. A few non-banking finance companies and couple of banks have also tried this method, incurring the wrath of the consumer activists in some cases. Customer is king, yes; but is the defaulting debtor also ... ?

Manu appears to have tacitly approved the use of even deceptive means, chhala, if need be, to recover the dues. By promising to give another loan if the present one is cleared, the lender can get his money back, but need not fulfill the promise. This is not the same as rolling over the outstanding loan as some of the clever branch managers do, to cover up the overdue advances. It is not book adjustment; it is an instance of role reversal, the lender behaving like the wayward borrower, not fulfilling the promise made.Foul or fair methodIt is a bit surprising that Manu was not averse to the use of means fair or foul for debt recovery. Even torturing the borrower - killing his wife or kidnapping his children - was silently approved by him. The loan defaulter is condemned to face the ignominy and deprivation of his properties. Sitting at the debtor's door to bring about a change of heart and the creditor, starving himself to death are other methods to enforce repayment of dues!

A commentator of Manu says that this custom corresponds to the so-called prayopavesana or dharna (a la satyagraha?). The means of recovery suggested vary so widely that they may be acceptable to as diagrammatically opposite people as the mafia and mahatma. Lender, whom Manu calls uttamarna, has the law-giver's full support in getting back his money from the borrower, the adamarna whatever may be the problems, culminating in non-repayment.

Manu would have frowned upon the modern law-makers who concede to write-off a part of the dues in their anxiety to cleanse the banks' balance sheets, which have accumulated as non-performing advances over the years! The banker today appears to be at the mercy of the borrower. During the Vedic period, lending was a simple bipartite transaction, written (lekhya) or unwritten, without any third party intervention. The lender would employ all methods mentioned in Manu's manual and would seek the king's support only when he fails to collect his dues despite all attempts. Never encouraging his needy customers to be frugal, the shrewd moneylender has thrived and prospered on the overdues and miseries of his victims. Not being accountable to anybody for his financial results at the end of the day, he rarely lamented over the loan defaults.

He had his own methods of recovering without publicising, unlike his modern day counter part who serves the legal notice (the cost of which of course, is loaded on the overdue amount!) on the defaulter. He waits thereafter patiently, as the ball is now in the debtor's court.

Modern banking and its woes

Modern banking is more complicated than Manu's simple banking model, not necessarily due to sophisticated transactions, but owing to the presence of more players in the banking arena, more than what is justifiably needed. Banker today is guided by the policies and pressures emanating from the following:Expectations of the owners - the Government of India; Stipulations of the regulator - the Reserve Bank of India; Recommendations of the sponsoring agencies - official and non-official; Aspirations of the local bosses - the district administrators and also the elected representatives; Specifications by the borrowers, indicating the size and shape of credit. Extending credit, in consonance with the directions of all the above sources, is indeed a difficult task performed by the banker.

His decision is influenced by the advice -implicit or explicit - originating from them, lulling him to believe that he has a decision-supporting system to back him. Its fragility is realised only when he proceeds to recover the duesThe official agency sponsoring the applications for loans under the poverty alleviation programmes, has no responsibility beyond the identification of the poor.

The consultancy firm which prepares the elaborate technical feasibility reports for securing large advances from the banks, disowns any responsibility for the failure of the project and the attendant problems of repayment. Small-scale industries which acquire sickness, real or feigned, are left on the lap of the banker, specially where the entrepreneur has no stake in the investment made. With a view to preventing the loan documents from becoming time-barred, the banker rushes to the court, filing suit against the borrower. Time and tide wait for none, but the court verdict is awaited. While interest is calculated on the overdue amount in the bank's books, he and his lawyer lose interest in the case, as the years roll by. The periodical transfers of the bank staff, though administratively imperative, tend to dampen the rigour of the recovery measures. For the new manager, it is only a numbered, suit-filed account, among many other accounts.

Manu's lender did not encounter such problems in his simple lending model. In a multi-variable model, where some of the variables cannot be quantified, one does not know how Manu would rewrite his manual of instructions.

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