The New Curfew on Recovery Calls
The most significant change for borrowers is the introduction of a strict time window for all recovery-related communication. Starting January 1, 2027, banks and their recovery agents can only contact borrowers between 8 AM and 7 PM. Any calls, messages,
or visits outside these hours will be prohibited unless the borrower has specifically requested or consented to a different time. This rule aims to end the practice of late-night or early-morning calls that cause significant distress and intrusion into borrowers' personal lives, effectively drawing a clear line between legitimate recovery efforts and harassment.
Why Were These Rules Needed?
The RBI's intervention comes after a rising number of complaints against the aggressive and often abusive tactics employed by some recovery agents. These practices included intimidation, use of threatening language, repeatedly calling, and even public shaming on social media. The central bank noted that such conduct posed a serious reputational risk to the entire banking sector. The new framework is designed to codify professional conduct, ensuring that the process of debt collection is fair, transparent, and respectful of the borrower's dignity. It consolidates multiple previous instructions into a single, comprehensive directive.
More Than Just Call Timings
Beyond the time restrictions, the new rules introduce several other crucial safeguards for borrowers. Banks will be required to record all telephonic conversations between recovery agents and borrowers and preserve them for at least six months. This creates an evidence trail that can be used to verify complaints of misconduct. Agents must clearly identify themselves and the bank they represent, carrying a valid ID and an official authorisation letter. Furthermore, the regulations explicitly ban coercive practices like harassing a borrower's relatives, friends, or colleagues and posting personal information online.
Impact on Lenders and NBFCs
For banks and non-banking financial companies (NBFCs), these rules necessitate a significant operational overhaul. They are now unequivocally responsible for the actions of the recovery agents they hire. Lenders must adopt a board-approved policy for recovery, conduct thorough due diligence on agencies, and ensure agents are properly trained and certified. The requirement to record all calls and maintain detailed audit trails will demand investment in technology and process management. While the objective is to professionalise the industry, it will also increase compliance costs and require lenders to rethink their collection strategies to remain effective within the new boundaries.
New Rules for Digital Lending
The RBI has also addressed modern recovery tactics, particularly those involving technology. The new framework regulates the remote locking or disabling of financed devices like smartphones. Such an action is only permissible if the device itself was financed by the loan. Even then, restrictions can only begin after the loan is 30 days past due, and essential functions like incoming calls and emergency services must remain active. If a lender fails to restore full functionality within an hour of the borrower clearing dues, they must pay compensation to the borrower, creating a strong incentive for prompt action.
