RBI to Issue Draft Guidelines on Loan Recovery and Mis-Selling

The Reserve Bank of India (RBI) has announced plans to release draft guidelines concerning the recovery of loans and the mis-selling of financial products.  

This decision was communicated by RBI Governor Sanjay Malhotra on February 6, 2026, following the Monetary Policy Committee meeting where the repo rate was maintained at 5.25%. 

Harmonisation of Loan Recovery Instructions 

The central bank observed that different instructions currently apply to various categories of Regulated Entities regarding the engagement of recovery agents.  

To address this, the RBI has decided to review and harmonise all existing conduct related instructions. This move aims to standardise the engagement of recovery agents and other aspects concerning the recovery of loans across different entities. 

Regulations on Mis-Selling of Products 

The RBI highlighted that mis-selling financial products and services has significant consequences for both customers and the regulated entities. There is a requirement to ensure that third-party products sold at bank counters are suitable for customer needs and match the risk appetite of individual clients.  

Consequently, comprehensive instructions on the advertising, marketing, and sales of financial products and services will be issued shortly for public consultation. 

Read More: RBI Evaluates Enhanced Supervisory Framework to Mitigate Banking Risks! 

Conclusion 

The RBI has initiated steps to harmonise loan recovery rules and curb mis-selling practices. These measures are intended to standardise conduct among regulated entities and ensure that financial products offered to customers are suitable for their risk profiles. 

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