The Reserve Bank of India plans to implement a comprehensive overhaul of the overdue loan recovery process from January 2027, introducing strict controls on lenders and recovery agents, including technology usage and borrower protection measures.
India’s central bank is set to reshape how overdue loans are collected, with the Reserve Bank of India moving to put banks and non-bank lenders under much tighter control over recovery agents, borrower contact and the use of technology. According to ETBFSI, the new framework will take effect on January 1, 2027 and will require lenders to overhaul collection systems, contracts and internal monitoring before then.
The rules place the responsibility squarely on regulated lenders rather than on outsourced agencies alone. Banks and NBFCs will have to adopt board-approved recovery policies covering escalation paths, staff and agent behaviour and support for borrowers in financial difficulty. They will also need to vet recovery firms more closely, carry out background checks, review performance regularly and ensure agents are properly trained and certified, including through the Debt Recovery Agent programme of the Indian Institute of Banking and Finance or an equivalent recognised course.
The Reserve Bank has also tightened the rules on how collections can be conducted. Recovery calls will need to be recorded and retained for at least six months, while contact is generally limited to 8 am to 7 pm. Before any first in-person visit, borrowers must receive prior notice, and recovery staff must carry identification and lender authorisation. The framework also bars intimidation, abusive language, threats, public shaming and repeated anonymous calls, while lenders must ensure personal data is not used to pressure borrowers. Moneycontrol reported in February that the central bank had already proposed a civil code of conduct for recovery agents, signalling the direction of travel before the final framework was issued.
Technology-driven recovery will face some of the strictest limits. Lenders may only use device restrictions where the phone, tablet or laptop was financed by the lender, and even then only in stages with safeguards. Essential functions such as incoming calls, texts and emergency SOS must remain available. The rules also restrict access to sensitive data on borrowers’ devices, including contacts, photographs, messages, call logs and location history. If a lender delays restoring a device after the debt is cleared, compensation of ₹250 an hour may apply, subject to a cap. ETBFSI said lenders will also have to publish updated lists of recovery agencies, set up dedicated grievance systems and redesign incentives so staff and agents are not rewarded for coercive tactics.
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