The Reserve Bank of India is introducing stricter controls on recovery practices, requiring banks to ensure fair treatment and accountability of recovery agents, with new rules set to be implemented in January 2027.
India’s central bank is moving to tighten controls on how banks and their outsourced recovery agents pursue overdue loans, with new rules designed to curb harassment, improve borrower protection and make lenders directly responsible for the behaviour of agencies they hire. According to reports in The Economic Times and LiveMint, the Reserve Bank of India’s framework places greater accountability on banks and requires board-approved recovery policies, graded escalation procedures and clearer rules for borrower engagement.
The proposals go beyond broad conduct standards. Recovery agents would have to complete mandatory certification through the Indian Institute of Banking and Finance and follow a prescribed code of conduct, while banks would need to strengthen due diligence before appointing agencies. Moneycontrol reported that the draft framework also seeks a single, comprehensive set of rules for regulated entities, covering training, fair treatment of borrowers and the conduct expected from both bank staff and outsourced collectors.
The regulator is also drawing a firmer line around abusive practices. LiveMint and The New Indian Express reported that the draft bars harsh methods such as abusive language, inappropriate messages on mobile phones or social media, excessive calls and contacting borrowers outside prescribed hours. Harassment, public shaming and other coercive tactics are explicitly prohibited, while banks would be required to record recovery calls, disclose agency details more clearly and improve grievance redressal systems.
The framework also addresses digital recovery practices, including the locking of financed mobile devices. According to The Economic Times, such device restrictions would be allowed only under strict safeguards, and borrowers would be entitled to compensation if restrictions are applied wrongly. Kotak Neo said the draft was issued under the Banking Regulation Act and is expected to apply from January 1, 2027, after the consultation process is completed.
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