The Reserve Bank of India (RBI) is taking a significant step to protect borrowers from harassment by loan recovery agents.
Under the proposed rules, recovery agents will no longer be allowed to disturb borrowers with late-night or early-morning calls, and any form of threatening behavior will be strictly prohibited.
New Guidelines:
The RBI recently introduced a “Draft Master Direction on Managing Risks and Code of Conduct in Outsourcing of Financial Services.”
The guidelines emphasize that regulated entities, such as banks and non-banking financial companies (NBFCs), should not outsource critical management functions.
These functions include activities like policy formulation, compliance with Know Your Customer (KYC) norms, and sanctioning of loans.
Code of Conduct:
The RBI is urging banks and NBFCs to establish a comprehensive code of conduct for their direct selling agents (DSAs), direct marketing agents (DMAs), and collection agents.
This code of conduct will ensure that agents maintain responsible practices in their interactions with borrowers.
Sensitivity Training:
Regulated entities must also ensure that their DSAs, DMAs, and recovery agents undergo appropriate training to enhance their sensitivity when dealing with borrowers.
This measure aims to provide a more empathetic and understanding approach when recovering loans.
Prohibited Actions:
The central bank’s guidelines firmly state that REs and their recovery agents must refrain from using any form of threat or harassment, whether it’s verbal or physical, against borrowers.
RBI’s New Rules to Curb Arbitrary Loan Recovery Practices Public humiliation and invasion of a borrower’s privacy are strictly prohibited as well.
These new rules are set to bring much-needed relief to borrowers by curbing the arbitrary practices of recovery agents and ensuring that loan recovery is carried out in a fair and respectful manner.
