The Reserve Bank of India (RBI) has proposed major changes to bank loan recovery rules to protect borrowers from harassment and unfair recovery practices.
The new draft guidelines aim to make the loan recovery process more transparent, respectful, and customer-friendly.
Once finalized, these rules will come into effect from October 1, 2026.
The rules will apply to most commercial banks across India.
However, small finance banks, payment banks, regional rural banks, and local area banks will remain outside this framework.
RBI Clearly Defines Recovery Agencies and Agents
Under the proposed rules, the RBI has clearly explained who will be considered a recovery agency and a recovery agent.
Any outsourced company or individual hired for loan recovery work will be treated as a recovery agency.
People who directly contact borrowers for repayment will be called recovery agents.
The RBI has also clarified that these rules will apply to Business Correspondents (BCs) if they are involved in loan recovery activities.
This new framework will replace older guidelines and create a single, more detailed system for loan recovery across banks.
Banks Will Face Greater Responsibility
The RBI has now made banks more accountable for the behavior of recovery agents.
Banks will have to:
Create a proper recovery policy
Set up a complaint escalation system
Monitor the performance of recovery agencies
Compensate borrowers in case of wrongful recovery practices
Recovery agents will also need certification from the Indian Institute of Banking and Finance (IIBF) or an equivalent institution.
In addition, agencies must conduct background verification of all recovery agents and ensure they follow a strict code of conduct.
Big Protection Measures for Borrowers
The draft rules include several borrower-friendly provisions.
Banks will now have to maintain an updated list of approved recovery agencies on their websites and digital platforms.
Borrowers must also receive prior information at least one day before any recovery visit.
If a recovery agency is changed or removed, the borrower must be informed immediately.
The RBI has also proposed strict timing rules for recovery calls and visits.
Recovery agents will only be allowed to contact borrowers between 8 AM and 7 PM unless the borrower agrees to another time.
Harassment and Threats May Be Completely Banned
One of the biggest highlights of the new draft is the strict action against aggressive recovery tactics.
The RBI has proposed a complete ban on:
Abusive language
Harassment
Repeated unnecessary calls
Threatening behavior
Public shaming on social media
The goal is to protect the dignity and privacy of borrowers during the recovery process.
New Rules for Mobile Phones and Technology
The RBI has also included important rules regarding mobile phones financed through loans.
Banks or lenders will only be allowed to disable phone services if the mobile device itself was financed by the bank and specific conditions are met.
However, emergency calling services and public safety alerts can never be blocked.
The draft also says that if phone services are not restored quickly after repayment or issue resolution, borrowers will receive compensation of ₹250 per hour for the delay.
Additionally:
Recording of recovery calls will become mandatory
Recovery action must stop immediately if a complaint is pending
Banks cannot access or use data stored on a borrower’s phone
Through these proposed rules, the RBI wants to ensure fair treatment, privacy protection, and a more transparent recovery process for all borrowers in India.
