The Reserve Bank of India sets out comprehensive rules to prevent harassment by banks and recovery agents, effective from January 2027, marking a significant shift towards borrower protection.
The Reserve Bank of India has moved to curb aggressive loan collection practices, telling banks and recovery agents that they can no longer use pressure tactics, abusive language or public shaming to chase overdue payments. According to Business Today, the new framework is meant to protect borrowers, guarantors and other family members from harassment while still allowing lenders to recover dues through a regulated process.
The report said the rules will take effect on January 1, 2027, and set a strict window for contact: recovery calls and visits can only take place between 8am and 7pm unless the borrower has agreed otherwise. Agents will also have to respect a customer’s preferred time and place for communication, and they cannot keep ringing from unfamiliar numbers, make misleading claims or contact relatives, friends or colleagues in an attempt to apply pressure. Mint had earlier reported that similar draft norms were intended to block threatening or abusive language and excessive calls.
The RBI has also tightened the rules around in-person visits. Recovery staff are expected to first try to contact the borrower at a pre-arranged location, and home or workplace visits can follow only after repeated missed meetings. The framework also asks lenders to avoid collection efforts during family deaths, medical emergencies, weddings and other serious personal situations, while prioritising arranged contact for microfinance loans as well. Before any first visit, the borrower must be informed at least a day in advance, and banks must keep an updated list of empanelled recovery agencies on their websites.
The central bank has put the onus squarely on lenders, saying outsourcing collection does not remove a bank’s responsibility for what its agents do. Recovery agencies must be checked, monitored and audited, and staff need training before they begin field work. Each agent must carry a bank-issued identity card, authorisation letter and a copy of the relevant notice so the borrower can verify who is at the door. Calls are to be logged, borrowers told they are being recorded, and the records kept for at least six months, or until a court case ends if the matter goes that far. Banks must also set up a separate complaints channel and disclose the grievance officer’s details in loan documents and recovery messages. If a borrower or guarantor is harmed by a breach of the rules, the bank will have to compensate them under its own redress policy. Mint and other reports said the RBI has also been pushing lenders towards clearer grievance handling and tighter controls on recovery conduct.
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