The Reserve Bank of India has implemented stricter guidelines for lenders to prevent coercive practices and harassment during debt collection, aiming for fairer treatment of borrowers amidst growing concerns over recovery tactics.
The Reserve Bank of India has moved to tighten how banks and other regulated lenders pursue overdue loans, setting out a wider code of conduct aimed at curbing intimidation, excessive contact and public shaming by recovery agents. The new framework, described in draft and revised directions circulated by the central bank, is intended to force lenders to treat borrowers and guarantors more fairly during collection efforts.
According to the new rules, lenders would be limited to contacting borrowers and guarantors between 8 am and 7 pm, and would be expected to avoid calls or visits during sensitive moments such as a death in the family or a medical emergency. The central bank has also barred abusive language, the use of social media to post recordings or personal details, and repeated or anonymous calls. Business Standard and LiveMint both reported that the intent is to stop coercive tactics and harassment.
The RBI has also said lenders must put in place a formal recovery policy covering everything from the reason recovery is started to the steps taken before escalation, the conduct expected of staff and agents, and how cases involving a borrower’s death or financial distress should be handled. The framework also requires a structured process for repossession of pledged assets, including notice periods, the circumstances in which notice can be waived and the borrower’s final chance to repay before sale or auction, according to the materials summarised by Moneycontrol and The Times of India.
A further safeguard applies to mobile devices bought on credit. The lender may not disable a handset’s functions until 30 days after the repayment date has passed and the borrower has still not cleared the dues despite notice. Even then, only gradual restrictions are allowed, while essential features such as incoming calls, SMS and emergency SOS must remain available. Full restrictions can only be imposed after 60 days, and outgoing calls cannot be blocked before then. If a lender wrongly or belatedly restores a device after repayment, it must pay compensation of ₹250 an hour until the error is corrected, capped at the loan amount.
The new direction also places responsibility on lenders to record the timing and number of recovery calls and preserve the content or text of those interactions. Recovery targets, incentive schemes and agent contracts must not encourage harsh collection practices. The move fits a broader RBI push this year to standardise recovery conduct across regulated entities, reflecting growing concern about the treatment of borrowers at a time of stress and default.
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