Hyderabad, June 25: First, the loan-recovery bullies snoop around the neighbourhood, making sure the defaulter has no clout or connections.

Then they harass, slander and terrorise him and finally they strike.

If K. Yadaiah was indeed taken hostage on Saturday seven months after he stopped paying EMIs to ICICI Bank, he was facing the sixth and last stage of the thuggery.

The death of the 42-year-old electrician at the office of recovery firm Elite Financial Services — whether from torture or a seizure — has taken the lid off how banks’ collection agents wrench the money out of defaulters.

Hyderabad alone has 200-odd such firms, which style themselves “financial services companies” but are usually registered as clubs or associations to escape police scrutiny, officers said. “Each employs at least 25 jobless youths, including girls,” said city police chief Balwinder Singh.

The firms are hired by private and public sector banks, chit funds, shopping malls, even landlords and private money lenders, said a police officer from the economic offences wing. An employee of one of these firms outlined their methods.

First, the firms send a girl to the defaulter’s neighbourhood to enquire about his family, finances and standing — and if he has powerful relatives or friends.

Second, an “executive” in suit and tie arrives at his home and advises him to pay up, saying the bank is planning “serious steps” against him.

Third, a carload of casually dressed “boys” start calling at odd hours — in mid-afternoon, after dinner or at dawn. “Sometimes they call at midnight and sit for hours, bothering the entire neighbourhood,” the employee said.

The fourth step involves regular phone calls and visits to the defaulter’s office — embarrassing him before colleagues — and letters to his guarantor. “This is done to demoralise and intimidate, especially families with grown-up daughters,” the officer said.

The “real treatment” begins from the fifth stage. The family receives threat calls while for a week at a stretch, the agents keep visiting the defaulter’s office and home.

The last stage is abduction of the defaulter or his children or adult daughter. “Usually, this happens if the dues are over Rs 1 lakh,” the officer said. Yadaiah, however, had borrowed only Rs 15,000 for his daughter’s wedding and his dues were Rs 30,000.

Hyderabad police’s records say the firms have so far kidnapped 47 people, including 10 children, threatened at least 11 with murder and taken away 2,450 possessions such as TVs, two-wheelers, cars, refrigerators, washing machines and computers. Some 15 to 20 complaints of harassment are lodged daily.

The officer said the cases never lead to convictions as defaulters who fight back are bought off. “The banks still gain because the firms resolve hundreds of cases. They are paid 15 per cent of the sum, a retainership and their expenses.”

“The banks keep themselves out of the picture. Their contracts do not overtly authorise these firms to recover the loan,” an official of Credit Card Holders Association said.

“The defaulter can complain only against the agents and not the bank,” a bank official said. The Reserve Bank, however, has said banks are responsible for their loan-recovery agents’ actions.

Banks aren’t the firms’ only clients. “We work for real estate agents, rental firms, shopping malls, construction material suppliers, travel agents, money lenders, even landlords,” said Sheikh Mohammed Hussain, who employs 150-odd people in his three-room office in the busy Abids locality.

Four held

The police have detained four Elite Financial Services employees who had allegedly accompanied Raju, the team leader, to Yadaiah’s home and office. Cases of wrongful confinement and culpable homicide not amounting to murder have been filed. The police are waiting for the post-mortem report to verify the torture charge.

Raju is in hiding. Yadaiah may be cremated tomorrow.