The Reserve Bank of India (RBI) has issued draft directions proposing tighter rules for loan recovery practices followed by commercial banks, as per news reports. The proposed norms are scheduled to come into force from October 1, 2026, after the final framework is notified.
The directions have been issued under the Banking Regulation Act, 1949. The framework will apply to commercial banks, excluding Small Finance Banks, Payments Banks, Regional Rural Banks, and Local Area Banks.
The draft introduces formal definitions for “recovery agencies” and “recovery agents”. Outsourced entities involved in loan recovery work, including Business Correspondents handling collections, will come under the proposed framework.
People directly interacting with borrowers during recovery proceedings will be classified as recovery agents. Banks will have to ensure background verification of such agents and arrange certification through the Indian Institute of Banking and Finance (IIBF) or similar institutions.
Recovery agencies will also be required to follow a code of conduct approved by banks.
Banks will need to publish updated lists of empanelled recovery agencies on their websites and digital platforms.
Borrowers must be informed at least one day before any recovery-related visit takes place. Banks will also have to notify customers in cases where a recovery agency is changed or removed.
The draft asks banks to put in place detailed recovery policies covering monitoring systems, escalation mechanisms, due diligence standards and compensation procedures linked to recovery-related complaints.
The RBI has proposed limiting recovery calls and visits to between 8 am and 7 pm unless the borrower requests otherwise.
The draft bars the use of abusive language, intimidation, harassment, repeated calling and social media-based public shaming during recovery proceedings.
Banks and recovery agencies will also not be allowed to access data stored on borrowers’ mobile devices for recovery purposes.
Under the proposal, banks cannot disable mobile device functions for recovery unless the device itself was financed by the lender and specific safeguards are followed.
Emergency calling and public alert features must remain functional. Borrowers will be entitled to compensation of ₹250 per hour if device access is not restored after repayment or settlement.
The draft also proposes mandatory recording of recovery interactions and suspension of recovery action until pending borrower complaints are resolved.
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The RBI’s draft framework sets out fresh compliance requirements for commercial banks on recovery processes, customer communication and recovery agent conduct. The directions are currently open for finalisation before implementation.
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Published on: May 21, 2026, 2:56 PM IST
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