New Delhi: In what can come as a huge relief for the borrowers, the Reserve Bank of India (RBI) has proposed introducing rules which would tighten the rules as to
how banks recover loans and engage recovery agents. The central banking authority has released a draft titled RBI (Commercial Banks – Responsible Business Conduct) Second Amendment Directions, 2026, which is aimed at giving more protection to the borrower, and preventing harassment during loan recovery.
Notably, while presenting the Union Budget 2026-27, Finance Minister Nirmala Sitharaman proposed reforms in loan recovery practices.
The RBI has released the draft at a time when complaints about the misconduct of recovery agents have also increased. The RBI has sought suggestions on its proposals mentioned in the draft.
RBI’s proposed Loan Recovery Rules
A per the draft norms, banks will be required to put in place a formal, board-approved policy governing the appointment and conduct of recovery agents. Lenders must clearly define hiring standards, acceptable behaviour, monitoring mechanisms and complaint-handling procedures. Recovery agents can no longer function as loosely supervised third-party extensions of banks.
The draft states that , every bank will have to create a formal and written recovery policy which will mention the details of the appointment and conduct of recovery agents. If the proposed rules are implemented, the banks will be mandated to identify people facing difficulties in paying installments and to explain and suggest solutions to them will lie with the bank. Banks would be required to publish the list of authorised recovery agents on their websites, apps, and at branches so that borrowers could easily get the information of whether the recovery agent is authorized by the bank or not.
Key Borrower Protections: Rights and Conduct Standards
A bank shall put in place a policy on recovery of loans, engagement of recovery agents for recovery of loan dues and taking possession of security. The policy shall, inter alia, cover aspects related to eligibility and due diligence criteria for engagement of recovery agents, specified activities, Code of Conduct, performance evaluation standards, inspection / audit, control mechanisms to ensure compliance with statutory / regulatory requirements by recovery agents and procedures to be followed / penal actions to be taken in case of non-compliant recovery agents. The policy shall also include aspects
related to recovery of loan dues in case of demise of borrower(s) or guarantor(s), the RBI draft read.
In its proposed guidelines, the RBI has said the designated recovery agents will be able to contact borrowers only between 8 am and 7 p.m. and respect the borrower’s private life and dignity. Calling or harassing relatives, friends, or colleagues will be completely prohibited. Contact will not be made on sensitive occasions such as weddings, mourning, or festivals.
When a borrower makes a payment, bank will be required to issue a receipt. The bank will also have to keep records of the calls made by their agents to the borrowers. Conversations should be recorded, and the customer will be informed of this in advance.
Abusive language, defaming the borrowers, creating pressure through social media, or giving false legal information, will not be tolerated, RBI categorically mentioned. The RBI has clearly stated that any kind of hooliganism in the name of recovery will not be accepted.
A bank shall ensure that recovery agents engaged by it have obtained the certificate from Indian Institute of Banking and Finance (IIBF) after completing the training programme for Debt Recovery Agents offered by IIBF or any other institute having a tie-up arrangement with IIBF, the RBI further mentioned.
