The Reserve Bank of India (RBI) has introduced a new regulatory framework for loan recovery practices aimed at preventing harassment of borrowers who fail to repay equated monthly instalments (EMIs) on time. The new guidelines, which will come into effect from January 1, 2027, require banks and regulated lending institutions to follow stricter procedures while communicating with borrowers, appointing recovery agents and using technology-based recovery methods. The framework lays down clear rules on calling hours, physical visits, data usage, agent conduct and remote restriction of financed electronic devices. The move is expected to bring greater transparency and accountability to the loan recovery process.
Recovery Agents Cannot Call Borrowers Anytime
Under the new RBI framework, banks and recovery agents will not be allowed to contact borrowers at any time of the day. Recovery-related calls and visits will generally be permitted only between 8 am and 7 pm. Any communication outside this time window will require prior request or approval from the borrower. The central bank has also instructed recovery agents to avoid contacting individuals during sensitive personal situations, including bereavements, medical emergencies or important family occasions such as marriages. The RBI has prohibited aggressive recovery practices, including threatening language, abusive communication, intimidation or repeated unwanted calls. Recovery agents cannot make anonymous calls or threaten borrowers with damage to their reputation, property or family relationships. The use of social media for borrower humiliation has also been banned. Agents cannot share personal details, photographs, videos or audio recordings of borrowers publicly to pressure them into making payments.
Physical Recovery Visits Will Require Prior Notice
The RBI has introduced additional safeguards for physical recovery visits. Before making the first in-person visit, recovery agencies must inform borrowers at least one day in advance. Banks will also have to provide details of the recovery agency assigned to the borrower’s account. Borrowers should normally be contacted at a location preferred by them. A recovery agent can visit their residence or workplace only when no preferred location has been provided or when the borrower repeatedly fails to appear at the agreed location. During any visit, agents must carry proper identification documents, including an identity card, authorisation letter and relevant notices. The authorisation letter must contain details of the recovery agency as well as contact information of the bank’s grievance redressal officer. The RBI has also placed greater responsibility on banks to monitor recovery agencies. Even when collections are outsourced, lenders will remain accountable for ensuring that agents follow regulatory requirements. Banks will be required to record recovery conversations and maintain details such as the number and timing of calls. These records must generally be preserved for at least six months. The central bank has also directed lenders to ensure that recovery agents receive proper training and that incentive structures do not encourage aggressive collection methods.
