The Reserve Bank of India (RBI) has introduced draft guidelines to tighten loan recovery practices by banks and their contracted recovery agents, with a strong emphasis on protecting borrower rights and ensuring humane behaviour during the loan collection process. The framework seeks to curb harassment, protect borrower information, and bring uniform standards to loan recovery activities across the banking sector.
These measures are part of a broader set of policy reforms intended to make loan recovery ethical, non-intimidating, and respectful — and are expected to be finalized by July 1, 2026, following public feedback by March 6, 2026.
New Guidelines on Borrower Communication
Under the draft rules, banks must ensure that all interactions by recovery agents with borrowers are conducted in a civil, respectful, and professional manner. This includes:
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Recording all phone calls made by agents to borrowers.
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Prohibiting abusive language, threats, or intimidating behaviour.
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Restricting calls and visits to reasonable hours (typically between 8 a.m. and 7 p.m.).
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Ensuring that agents respect borrower privacy and refrain from inappropriate messages.
Banks also must maintain clear policies to ensure that personal customer information is not misused by agents or employees during the recovery process.
Training and Certification of Recovery Agents
A key requirement of the draft norms is that loan recovery agents must undergo certified training, such as the debt recovery programme offered by the Indian Institute of Banking and Finance (IIBF) or an approved equivalent. Banks are expected to only engage agents who have completed this training and received certification.
The aim of these standards is to ensure that agents are not only qualified but also educated about proper conduct, fairness, and legal boundaries when dealing with customers.
Prohibitions and Restrictions on Recovery Activities
The draft guidelines include a comprehensive list of prohibited practices aimed at preventing harassment and unethical behaviour:
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No abusive or threatening language.
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No excessive or intrusive calls beyond specified hours.
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No contacting relatives, friends, or third parties to exert pressure.
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No contacting borrowers during sensitive occasions like bereavements or festivals.
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No misleading or misrepresentative communication about debt or recovery consequences.
If a borrower has already lodged a grievance with the bank, the draft requires that recovery action not be forwarded to recovery agents until the grievance is resolved.
Verification and Monitoring Requirements
Banks must also implement strict due-diligence verification of all recovery agents, checking their antecedents before engagement, and periodically thereafter. This verification process is designed to ensure that only ethical and compliant representatives are involved in debt recovery.
In cases where a borrower’s loan dues are subjudice (under legal dispute), banks are instructed to exercise “utmost caution” before referring such cases to recovery agents.
Impact and Objectives of the Draft Norms
Overall, the RBI’s draft guidelines aim to:
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Foster fair treatment of borrowers during recovery.
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Reduce instances of harassment and coercive tactics.
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Standardize loan recovery practices across all banks.
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Promote professional and ethical conduct by staff and agents.
These reforms build on earlier RBI actions and are expected to greatly improve borrower protection and confidence in the financial system.
