Why Were New Rules Needed?
For years, the loan recovery process has been a significant source of stress for borrowers. Complaints of harassment, calls at all hours, intimidation, and public shaming have been widespread. The lack of a single, consolidated set of rules created ambiguity,
which was often exploited. Recovery agents, sometimes using aggressive tactics, operated in a grey area. The RBI's new directives aim to replace these fragmented instructions with a unified, comprehensive code that holds lending institutions directly accountable for the conduct of the agents they hire.
The End of 'Anything Goes' Recovery
The new rules explicitly ban coercive and unethical practices. From January 2027, recovery agents cannot resort to intimidation or harassment of any kind, whether verbal or physical. This includes using threatening or abusive language, posting a borrower's personal details on social media, or sending inappropriate messages. Furthermore, agents are prohibited from contacting a borrower's relatives, friends, or co-workers to apply pressure. The framework aims to ensure the dignity of the borrower is maintained throughout the recovery process.
Strict Timings and Clear Identification
One of the most significant changes is the introduction of a strict timeline for contact. Recovery agents can now only call or visit a borrower between 8 a.m. and 7 p.m., unless the borrower explicitly requests otherwise. Anonymous calls are banned. Agents must carry and present a valid identity card and an authorisation letter from the bank for every interaction. Banks are also required to inform the borrower in advance about the details of the recovery agency assigned to their case and publish an updated list of these agencies on their websites.
New Rules for Digital Lending and Device Locking
The RBI has also addressed modern recovery tactics involving technology. The new framework prohibits lenders from remotely locking a borrower's phone, laptop, or other devices as a recovery tool, with one specific exception: if the loan was taken to finance that particular device. Even in such cases, lenders must follow a gradual process. They cannot impose any restrictions until the loan is 30 days overdue, and a full restriction is only permissible after 60 days. Crucially, essential services like incoming calls, SMS, and emergency features cannot be disabled. If functionality is not restored within one hour of payment, the borrower is entitled to compensation.
Accountability and Your Right to Grievance
The new rules place the ultimate responsibility on the banks and NBFCs, not just the third-party agents. Lenders must have a board-approved policy for recovery and ensure their agents are properly trained and certified by the Indian Institute of Banking and Finance (IIBF). All recovery-related phone conversations must be recorded and preserved for a period. Most importantly, every bank must establish a dedicated and accessible grievance redressal mechanism for borrowers to report violations of these rules. If a bank doesn't resolve a complaint within 30 days, a borrower can escalate it directly to the RBI Ombudsman.
