The Reserve Bank of India (RBI) has introduced a draft of new rules related to bank loan recovery.
These proposed rules aim to make the recovery process more transparent, fair, and borrower-friendly.
The biggest focus of the new framework is to stop harassment by recovery agents and protect the dignity and privacy of borrowers.
Once finalized, the new rules will come into effect from October 1, 2026.
Which Banks Will Follow These Rules?
The new RBI guidelines will apply to most commercial banks across the country.
However, some institutions have been kept outside the scope of these rules, including:
Small Finance Banks
Payments Banks
Regional Rural Banks
Local Area Banks
The RBI has also clearly defined the roles of recovery agencies and recovery agents for the first time.
Any outsourced company handling loan recovery will be treated as a recovery agency, while people directly contacting borrowers will be known as recovery agents.
These rules will also apply to business correspondents involved in loan recovery work.
Banks Will Now Have More Responsibility
Under the new draft, banks will have to create a proper recovery policy and monitor the conduct of recovery agencies closely.
Banks will also be responsible for:
Checking the background of recovery agents
Monitoring agency performance
Handling borrower complaints properly
Paying compensation if wrongful recovery causes losses to borrowers
Recovery agents will now need certification from the Indian Institute of Banking and Finance (IIBF) or an equivalent institution.
Agencies must also follow a strict code of conduct.
Big Protection for Borrowers
The RBI has proposed several important protections for borrowers under the new rules.
Banks will now have to maintain and regularly update the list of authorized recovery agencies on their websites and digital platforms.
Borrowers must also receive prior notice at least one day before any recovery visit.
If a recovery agency is changed or removed, the borrower must be informed immediately.
Strict Limits on Recovery Calls and Visits
The RBI draft also puts strong restrictions on how recovery agents can contact borrowers.
Recovery calls and visits will only be allowed between 8 AM and 7 PM unless the borrower agrees to another time.
The proposed rules also seek to completely ban:
Harassment and abusive language
Repeated unnecessary calls
Threats and intimidation
Public shaming on social media
These steps are aimed at stopping aggressive recovery practices that have troubled many borrowers in recent years.
New Rules for Mobile Phones and Technology
The RBI has also proposed rules regarding mobile phones financed through bank loans.
Banks will only be allowed to disable phone services if the device itself was purchased through financing.
Even then, emergency calling and public safety services cannot be blocked.
If phone access is not restored quickly after loan repayment or issue resolution, borrowers may receive compensation of ₹250 per hour for delays.
Another major change is that all recovery calls must now be recorded.
If a borrower’s complaint is under review, recovery action must stop immediately until the issue is resolved.
The RBI has also clearly stated that banks cannot access or misuse personal data stored on borrowers’ mobile phones.
Aim Is to Make Loan Recovery Fair and Transparent
Through these proposed rules, the RBI wants to create a uniform recovery system across all banks while ensuring respectful treatment of borrowers.
The central bank’s focus is not only on loan recovery but also on protecting the rights, privacy, and dignity of customers during the entire process.
