The Reserve Bank of India (RBI) appears to be making some changes to its proposed rules for banks and debt recovery agents.
The latest feedback suggests that some of the earlier strict requirements may now be relaxed.
A few months ago, the RBI proposed tighter rules to control the behaviour of recovery agents and protect borrowers from harassment.
However, after receiving feedback from banks and other stakeholders, the central bank has decided to modify some provisions.
Banks May Not Need to Show Individual Agent Details
One major change is related to the disclosure of recovery agent details.
Earlier, banks were expected to provide information about individual recovery agents.
Under the revised approach, banks may only need to disclose details of the recovery agency, including its name, address, working period and area of operation, on their website or app.
The requirement to display the names and addresses of individual recovery agents has been removed. This could make it harder for customers to identify or track a particular agent who contacts them.
Background Checks and Digital IDs Made Easier
The RBI has also simplified the background verification process. Recovery agents can now be screened either by the recovery agency or by the bank.
Agents may also be allowed to carry digitally verifiable identification and authorization documents instead of physical ID cards and letters.
While this could make field operations easier, customers may need a simple and reliable way to verify these digital documents.
New Rules Delayed Until January 2027
The RBI has also provided more time to implement the new requirements.
The proposed effective date has been shifted from October 1, 2026, to January 1, 2027. Some existing recovery agents may also receive an additional year to obtain the required IIBF certification.
This gives banks and recovery agencies more time to prepare for the new rules.
Law Firms Get Exemption
Another important change concerns law firms.
According to the revised approach, law firms that only prepare legal notices or represent banks in court will not be treated as recovery agencies.
As a result, such firms will not have to follow all the requirements applicable to recovery agencies.
Overall, these changes could reduce the compliance burden on banks and recovery agencies.
At the same time, questions remain over whether customers will have enough protection against aggressive or unfair recovery practices.
Recovery Agent Harassment Has Been a Long-Standing Issue
Complaints about aggressive debt recovery practices in India are not new. Courts and the RBI have repeatedly addressed the conduct of banks and their recovery agents over the years.
In the 2007 ICICI Bank vs. Prakash Kaur case, the Supreme Court strongly criticised the use of strong-arm recovery methods.
In subsequent cases, courts have also stressed that banks can be held responsible for the actions of recovery agents hired by them.
The RBI has issued guidelines and fair-practice requirements over the years to protect borrowers. The latest comprehensive directions are now expected to come into effect from January 1, 2027.