When Tapan Bose fell behind on his car loan repayments to the largest commercial bank in India he could not have known that it would leave his friend’s son requiring 12 stitches in his battered skull.

Mr Bose escaped a vicious beating by a gang of the country’s notorious debt collectors because he was inside a club when they came calling for 34,000 rupees (£400) owed to ICICI Bank. Instead, it was 21-year-old Vinod Kumar who was sitting in Mr Bose’s car, waiting for his father and his friend to emerge. Three men dragged him out and beat him with iron rods before seizing the car. He was in hospital for a fortnight with severe head and back injuries.

This week a Delhi judge condemned the savage attack carried out in the name of ICICI and fined the bank 550,000 rupees in a landmark case that comes as India’s banking regulator tries to reform the nascent debt-collection industry. The behaviour of rogue agents is of increasing concern in India, where the credit culture is new and interest rates are rising.

“No civilised society governed by the rule of law can brook such kind of conduct,” Justice J. D. Kapoor, the President of the Consumer Commission, said. Handing down the biggest fine yet in a consumer case, he said that the bank had allowed the agents to behave like robbers.

This is the first time that an Indian bank has been held accountable for the actions of third-party agents appointed to collect bad debts. In its defence, ICICI argued that it had not sanctioned any criminal conduct. It has since sacked the collection manager of the branch who appointed the agents and two men have been arrested by police. The bank was ordered to pay Mr Bose, a 42-year-old builder, 5,000 rupees’ compensation, write off the loan and deposit 50,000 rupees into a consumer welfare fund for court costs. ICICI said that it would abide by the judgment.

The economic boom in India has led to a surge in earnings and consumer aspirations. Commercial lenders have been quick to offer easy finance for homes, cars and other big purchases previously out of reach for most Indians. Banks have been accused of employing aggressive tactics, such as persistent cold calling, to win new business with little regard to a potential customer’s credit risk.

“In order to make more profits, these banks attract people who cannot afford a two-wheeler and encourage them to buy a four-wheeler,” Prashant Mehendiratta, Mr Bose’s lawyer, told The Times. “This is OK for most salaried employees but the cash income of the lower middle classes fluctuates. They don’t understand that it is easy to get a card but harder to pay it off.”

With the number of defaulters on the rise, Indian banks have come under pressure to collect more loans to protect their credit ratings. This has led to the outsourcing of the task to agents, who can employ thuggish tactics to earn their commission.

In some cases, the intimidation has had tragic consequences. Prakash Sarvankar, a father of three, hanged himself in Bombay two months ago because he was unable to repay a 50,000-rupee ICICI loan. In his suicide note he blamed the agents for threatening him and his family. The bank eventually agreed to pay 15,000 rupees compensation.

Borrowing ideas

— The Indian loan market has grown 11-fold in the past five years, partly because of aggressive marketing

— HSBC India advertises its personal loans for “when expenses arise, like your daughter’s marriage, furnishing your home or a family holiday”

— The bank claims that it is “just like borrowing money from a friend”

Sources: HSBC, agencies

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