Mumbai, Oct. 30: The Reserve Bank may impose a temporary or even a permanent ban on banks that engage rogue recovery agents even after getting legal notices.

“The Reserve Bank will consider imposing a temporary ban (or even a permanent ban in case of persistent abusive practices) on those banks against which strictures have been passed, or penalties imposed, by a high court or the Supreme Court with regard to abusive practices followed by their recovery agents,’’ the RBI said.

Bankers said RBI governor Y.V. Reddy was worried about the high-handedness of recovery agents.

The RBI said the number of litigations against banks for engaging rogue agents had been on the rise. This could harm the reputation of banks.

“An urgent need has arisen to review the policy, practice and procedure involved in the engagement of recovery agents by banks in India. Accordingly, banks are urged to follow prescribed conditions while engaging recovery agents,” the apex bank said.

Complaints received by the RBI on abusive practices of recovery agents will invite serious supervisory disapproval.

A circular in this regard will be issued by the central bank by November 15.

Later, speaking to newspersons, Reddy said, “I am hopeful our threat will work.”

He had earlier said a positive feedback had been obtained from banks on the proposal.

The RBI governor said banks had the right to recover loans, but when less than proper means were used, “we become responsible for the system as a whole to ensure such abusive practices are prevented”.

Reddy said banks should have adjustments and safeguards in place to prevent such practices.

They should use their own staff to recover loans if their agents were using abusive practices.