"These musclemen are hired by private sector banks. If a PSU bank is found using them, I will get the manager sacked the next day," said Finance Minister P Chidambaram in Parliament speaking on the issue of banks using musclemen to recover dues.

The seriousness echoed in the statement made by the finance minister is not really visible in the draft guidelines that the banking regulator, the Reserve Bank of India [Get Quote], came up with on 30 November. Although these guidelines are open to discussion, the note and tenor of the guidelines is, at best, a move by the regulator to protect the interests of the banking sector that has come under severe criticism for using strong-arm tactics while recovering loans.

RBI continues to believe that its primary responsibility is to protect banks from insolvency; its discomfort in protecting the rights of the retail customer is clearly visible from these guidelines.

The guidelines are unlikely to bring the much-needed succour to those who have been at the receiving end of recovery agents. It does little by way of protecting the interests of people who have been victimised or will be under threat.

But an even more fundamental question is -- do we need fresh guidelines when a banking code is already in place that deals at length with the procedure which collection agents are required to follow? The answer is no. What we need is proper implementation of the code that already exists, and not reams of fresh paper.

Goons coming to threaten and collect dues is nothing new, but the issue boiled over when Prakash Sarwankar, a Mumbai resident, committed suicide after being pushed to the wall by recovery agents and the issue hit national headlines.

However, before these guidelines came, it was hard to find voices from the banking industry acknowledging the use of strong-arm tactics by recovery agents. It took a series of suicides for banks and the regulator to take notice and the result is these guidelines.

But these guidelines fall seriously short of expectations. What the victimised borrower was expecting from the regulator was a mechanism that would have made his/her life easier. The draft guidelines advocate that banks should have a mechanism to address the grievances of borrowers. But, isn't there a contradiction in approaching the same institution for solving the problem whose agents are using these terror tactics?

RBI's move is lukewarm in punishment as well. For instance, if a bank is 'proven' guilty of using musclemen for recovering loans, there will be a "ban on a bank for engaging recovery agents in a particular area." The guidelines are also silent on the proposed duration of the ban.

Perhaps, imposition of an exemplary fine of an amount that would have hurt the bank's bottomline and share price would have acted as a better deterrent for other banks and also instilled faith in the average borrower about the regulator's seriousness in protecting his interests.

With the finance minister airing his views on this subject, the day is not far when we would have the final guidelines on the issue. When they do come out, their efficacy will rest on their implementation.

Banks need to go that extra mile to train the concerned people to prevent these rules from meeting the fate of the voluntary code. On a different note, the voluntary code is due for review in 2009. It will be interesting to note the changes that are incorporated.

However, given the manner in which measures aimed at protecting the interests of consumers are flouted, there is little an average borrower can do except make sure to meet his financial obligations towards financial institutions on time and pray that he does not get to encounter unpleasant situations beyond his control midway through his loan tenure.